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Zopa USA Peer to Peer Loans

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Zopa USA (San Francisco, CA) has partnered with credit unions, including USA Federal Credit Union (USA Fed), to offer personal unsecured loans and FDIC-insured certificates of deposit with a social networking twist. Every time somebody invests in a Zopa CD, a portion of the interest earned by the CD is provided to a Zopa borrower of their choice, reducing the interest rate on the Zopa Loan. The amount of interest donated ranges from 0.10% to the full interest rate earned on the Zopa CD.

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Zopa borrowers can post a profile on the Zopa web site to try to attract such donations. Zopa borrowers can also tell friends and family about the opportunity to earn interest on their savings and help them at the same time. The listings include a photograph, description, age, location, likes and dislikes, loan amount, original interest rate, and a thermometer showing the amount of help received toward the borrower's monthly payment. The listings are semi-anonymous and do not include the borrower's full name or contact information. Zopa borrower listings can be searched by keyword, age, state, purpose (including Education), amount of help needed, and credit union.

Zopa loans may be used to pay for college, but the terms are not customized for the needs of college students. The loans are up to 60 months. The borrower or cosigner must have a FICO score of 640 or higher (Equifax). Interest rates range from 12.5% to 18.0%. There is no prepayment penalty. Zopa does not specify the loan limits on its web site, but a review of borrowers in the Educator category shows a maximum loan amount of $25,000.

Zopa ("Zone of Possible Agreement") was founded in 2005 in the UK and arrived in the US on December 4, 2007. The UK model matched borrowers with lenders in a many-to-one process that diversified each lender's investment across many borrowers. Yhis pooled lending approach reduces the risk of losing one's investment due to a single borrower defaulting. US securities regulations, however, precluded the replication of this model in the US, at least initially. Instead, Zopa USA partnered with a credit union.

It is unclear from the Zopa web site nor the "partner" credit union web sites how Zopa earns revenue. Zopa does not seem to charge any fees to the borrowers or investors. Most likely Zopa is compensated by the credit unions. If so, this is not adequately disclosed on their web sites.

For more information call 1-888-TRY-ZOPA (1-888-879-9672).

 

 
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