How does Zopa make
money?
Zopa makes money by charging lenders and
borrowers a fee.
Zopa charges borrowers a fee of £118.50 and lenders a 1% annual service fee. And that's it. There are no hidden charges, no additional costs, no sneaky clauses.
Borrowers
Borrowers pay a fee of £118.50. The fee is paid up front when the loan application is agreed.
A borrower taking out a loan of £5,000 would have the fee of £118.50 added to their loan amount. Because we only lend money in chunks of £10, an extra £120 is added to the loan and once the fee has been deducted, the borrower would get £5,001.50 paid into their bank account.
If I...
...pay back my loan early, do I get any of my fee back?
No, because the fee covers the cost of arranging the loan. But as there is no early repayment charge, you won't pay any extra interest on your loan or the fee when you repay early.
Lenders
Lenders pay an annual 1% fee on the amount they lend to borrowers. They are not charged for money which has not been lent out. The fee is accrued on a daily basis equivalent to 1% p.a. and deducted monthly from their holding account balance.
A lender lending £1,000 at 7% would earn £70 of interest each year if the money is always lent out and paid back. They would pay a fee of 1%, or £10, in total.
We deduct the fee from the holding account balance on a monthly basis, once the lender has received the monthly repayments from their borrowers.
If a borrower defaults on part of their loan, the lender is not charged a fee for that part - that would just be daft. And similarly, if a borrower repays early, the lender pays no fee on the portion of the loan that has been repaid.
Next... What do you get for your money?