Posted by Christopher Stevenson
I've been intrigued by person-to-person lending for a couple years. I've watched the launch of Prosper and Lending Club, talked with representatives from Circle Lending (now Virgin Money, US), and followed the world-wide growth of P2P. Nevertheless, I lacked the vision to figure out how a credit union might be able to leverage P2P's power. As the Wall Street Journal reported yesterday, Zopa figured it out.
Instead of the typical online lender/borrower matchup, the credit union acts as intermediary. Lenders invest in Zopa-branded one-year CDs that fund the loans and borrowers can apply for a five-year loan with interest rates ranging from 8.75 percent to 16.99 percent, depending on their credit profiles. But the lender can also help out a borrower by directing some or all of their earned interest to help lower the loan payment. And, since it's Zopa, borrowers can still build their own profiles to help them appeal to other lenders to help them with their loans. Pretty cool stuff.
The new Zopa is safer than other P2P opportunities. Most P2P lenders, like Prosper, don't guarantee that lenders will get their money back, but Zopa-branded CDs are insured just like normal deposits, and the interest earned on the CD is not tied to whether or not the borrower pays back the loan on time. Sounds like the best of both worlds to me.
Zopa is launching with six credit unions, including FORUM Credit Union, Fishers, Ind. The other credit unions were not named in the WSJ article, but I will update this post as soon as I hear who they are.
