Peer to peer lending

I have a loan with zopa and i’m impressed with them so far. Does anyone use these services for loans and investing? I like the idea of it but people seem to be scared because they’re worried about people defaulting.

You can find lots of other people’s experiences searching around, eg.



My reading of the situation is this:

  • All of these P2P platforms are untested in a downturn
  • Rates are dropping due to increasing default rates
  • Liquidity is dropping due to increased default rates and reduced confidence from lenders
  • You might end up waiting months to get your money out

Your apparent rate might look ok while you’re still lending, but this can easily drop to a loss or just plain underperformance when you try to get your cash out.

Risks seem high, rates seem low. For a long term investment, the stock market would do you much better, for less risk (you primarily have a different kind of risk in a fully diversified equity portfolio: time risk).

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I have dabbled with Zopa since ?2010 ish. I have had no defaults but it was only £200. I have found the information good and no problems depositing nor withdrawing money. Never applied for a loan.

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The risks don’t really seem that high. Zopa for example say they only approve 20% of loan applications. Although brexit might be around the corner which could cause an increase in defaults.

The stock market probably is the better option though.

Zopa seem to be pretty good at reporting their stats.

The default rate climbed from less than 1% to more than 4% from 2013 to 2017. It looks like it drops in 2018 and 2019, but I think that’s just an artefact of new loans not defaulting early on. They estimate 2019’s defaults to be 3.77%.

It may not sound that bad, but it’s going to suck if you get stuck with some of these, and if as you suggest, economic issues spike defaults.

Taking in to account defaults and fees, they estimate a ~5% return. There are definitely easier and more liquid ways to make 5%.

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