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Zopa Loans - Pros and Cons

Low APR Personal Loans for those with Good Credit Ratings

Feb 5, 2009 Asa Ghaffar

Zopa loans are a peer-to-peer lender, allowing people to borrow money at a low APR. Whilst a good credit rating is essential, personal loans can be used for any purpose.

Zopa loans offer low APR home improvement loans and debt consolidation loans for between £1,000 and £15,000. Those wishing to borrow money will need to have a good credit rating. People with CCJs, loan defaults or late payments are unlikely to meet Zopa loans lending criteria.

According to Zopa, between July and September 2008 an average 3,700 borrowers joined each month. This represents a 48% increase in business compared to the first quarter of 2008. Sarah Kennedy, head of customer proposition at Zopa said: "Clearly the tightened lending criteria at the banks is helping to drive borrowers to look for alternatives."

Advantages of Zopa Loans

Personal loans for any purpose. Zopa personal loans can be used for any purpose, including home improvements and debt consolidation;
Low APR. Zopa offer personal loans at a low APR. Personal loan rates are amongst the most competitive in the industry for those that wish to borrow money;
Early settlement. Whilst Zopa offers 2 specific personal loan terms, 36 and 60 months, it is possible to pay off a Zopa loan at any time;
Opportunity to make money. Zopa allows people to lend up to £25,000 to people at a vastly more favourable rate of interest than is currently available in an ISA or current account. The lending of £500 would be spread across over 50 borrowers to spread the risk of loan default.

Disadvantages of Zopa Loans

Good credit rating. Those wishing to borrow money from Zopa loans will require a good credit rating. This means that there must be no missed payments or loan defaults in order to be approved;
High income. Applicants for a Zopa loan will need to demonstrate a taxable income of at least £25,000 per annum;
Recent borrowing. Zopa research has shown that those that have borrowed recently have higher loan default rates. Although they don't specify how long it should be since a previous personal loan, this could mean that a personal loan application isn't accepted;
Age restrictions. Zopa loans deal with two markets, including a young market for those between 20 and 25 and one for over-25's. Those over 25 will fall into categories A*, A, B and C. Those under the age of 20 will not be able to borrow money from Zopa loans due to the risk of loan default.

Zopa loans provide an excellent service, allowing customers with a good credit rating to borrow money at a low APR. Those struggling with bad credit may wish to consider a higher APR unsecured loan or a home owner loan. People struggling with affordability could pursue a debt solution, such as a debt management plan or Individual Voluntary Arrangement.

Those that found this article useful may also be interested in reading about the pros and cons of secured loans and avoiding loan sharks. A comparison of secured loans and unsecured loans will help someone decide which is the better option for their own unique personal circumstances.

The copyright of the article Zopa Loans - Pros and Cons in Mortgages/Loans is owned by Asa Ghaffar. Permission to republish Zopa Loans - Pros and Cons in print or online must be granted by the author in writing.