Lowest all-time loan rates from Zopa
One of the biggest players in the peer to peer lending sector has just announced the lowest ever interest rates for borrowers. Zopa is offering a rate of just 4.9% on unsecured loans of between £7,500 and £15,000 from June 2013.
Shopping around the banks and building societies can get you similar deals, for example Derbyshire building society has a loan at 5% interest rate, but they are few and far between and you may not meet the criteria. It is very hard to get a low interest rate on the high street with smaller sums borrowed. Andrew Hagger, personal finance specialist at Moneycomms, compares a Zopa loan for £3,000, with a rate of £8.2% over three years, favourably to an average of 16% from banks for loans of this size.
However there may be a downside. Andrew Hagger goes on to say that unless your credit-rating is spotless you won’t get the lowest advertised rate. “Don’t expect these providers to be an easy option” he says “the opposite is probably true with these lenders utilising rigorous criteria to keep bad debt levels to an absolute minimum – critical for the on-going success of their business.”
So perhaps peer to peer lending, where the loan process is supposed to be simpler and cheaper, cannot get away from extensive credit security checking to protect lenders. Borrowers with Zopa apply for a loan online. They must have a regular income and be at least 20 years old. Zopa then run credit and fraud checks and get back to the applicant within two to three days if they have been accepted, with the offered interest rate. This strict system has kept loan default rates low – Zopa’s average is just 0.31%. But interest rates are set to become less competitive as the industry becomes more bogged down in red tape and security checks.
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