A question you my have found yourself asking recently is do we really need banks, is there not a better way to do things, than just trust these bankers with all our money. Enter Zopa, a website that asks the question can we bring investors and borrowers together through the web.
Zopa works a lot like a torrent programs. Now I’m not saying that anyone of you would have ever used one of these to illegally download a movie or a new album. But just incase you know a guy who knows a guy who did then hopefully this analogy will work for you katcr.to. Torrents work like this, if you want to download a file the torrent program will go to all the active users who have that file on their hard drive and ask them each to give a small part of their internet bandwidth so you can download just a small part of that file from them. The torrent program takes all those small parts that you download from hundreds or maybe even thousands of people and makes those parts in one file. You didn’t borrow from one person you borrowed from many and this is how Zopa works in loaning money in a new innovative and more personal way.
Zopa was founded in 2005 and was meant as a way to put some of the power back in the hands of the people at a time when interest rates were and still are very low thehiltonian. It was a collective frustration at the global banking system that takes your money and loans it outs at rates as high as 14% to 16% and gives you back 0.5%. The same banking system that probably just charged you a $50.00 fine for some small thing and in doing so totally wiped out the gain of any interest you’ve made.
Zopa is cutting out the middle man, if you want to put money out to make interest, you don’t have to go through your bank you can go straight to a borrower. Log onto the site and you’ll see a list of potential borrowers carefully and painstaking vetted by Zopa (who’s repayment rate to date is 99.35%). Those potential borrowers are broken up into five categories based on the potential risk. A*’s have a more reliable credit history than A’s. In turn A’s beat B’s who beat C’s. And the fifth category Y, is set aside for potential borrowers who fall into the 20 to 25 years of age bracket and therefore don’t have enough of a credit history to make a clear judgment.
Now the great thing is that once you choose who you want to lend to, you can also choose at what interest rate and time scale you want to lend at. Now obviously you have to be competitive. An A* rated borrower is not going to accept your offer of $1000.00 at 20% interest. A*’s usually lie around the 8% mark. But even at that level you’re matching the average the return on stock market investments.