At the end of April this year Zopa introduced Safeguard lending to help you:
The new Safeguard product has been extremely popular with over 15,000 savers already using it. This means those using Safeguard are now funding all new loans through Zopa and attracting a record number of credit-safe borrowers seeking competitive rates.
But this does mean that if you still have money on a non-Safeguard offer you will now lend money only rarely. When your money is waiting to be lent it doesn't earn interest so funds on non-Safeguard offers are missing out – this money isn't working for you.
It’s easy to switch to Safeguard - just sign in to Zopa and use the Try Safeguard offer button on your dashboard.
Below we’ve explained in more detail how Safeguard and non-Safeguard offers work.
The Safeguard offer includes the tracker rates tool. You use tracker rates to effortlessly follow the loans market and lend your money at the most competitive rates to each type of loan. It means you don’t miss out on interest by accidentally offering too low a rate or having a rate that is too high and prevents you from lending your money. The tracker rates do a lot of the research on loan pricing for you and mean you don’t need to manually check and amend your rates every day to earn the best available return.
Zopa loans come in all shapes and sizes to offer our smart borrowers the right loan for them based on their credit rating and the size and term of loan they are looking for. These different types of loans, which we refer to as loan markets, have different interest rates - influenced by the rates other banks offer for loans and supply and demand on the Zopa platform – so you earn different rates of interest from each loan market. Here is an example of the tracker rates you can earn for different loan markets on the 12th June 2013.
Every saver who lends through the Safeguard will receive a ‘basket’ or mixture of these different loan markets. Zopa looks at the proportions of each type of loan borrowers choose every day and the latest tracker rates in order to show you a projected return for that day – a blend of the rates of different markets and their popularity. You can see the daily history of the projected returns when you sign in to your Zopa account. While the proportion of loans you receive may vary on a daily basis, especially if you are only lending a small amount of money, on average and over time your basket of loans should closely follow the projected returns during the time it takes to lend your money.
The Zopa team closely monitors the proportions of different loan markets that borrowers are looking for as this influences the return received by savers. In order for you to receive the best allocation of loan markets when lending through Safeguard, we prioritise money offered through Safeguard offers over the non-Safeguard lending offers.
Whilst the tracker rates tool in Safeguard looks for the best available return, the non-Safeguard offers prioritise the cheapest rates in each loan market regardless of loan size. Particularly in the A and B markets, savers were previously competing with each other to lend at rates that delivered a lower return than was available in A*. This both reduced their return and meant they were not correctly taking into account expected defaults (i.e. when a borrower cannot repay their loan) when considering their return. With the tracker rates you earn a better return in these markets and do not have to worry about defaults because the Safeguard was created to step in to give you back all the money owed to you if a borrower is unable to repay.
As so many Zopa savers are now earning a better return through Safeguard, this does unfortunately mean those using non-Safeguard offers will experience much slower lending through a non-Safeguard offer, because Safeguard lending is prioritised.
As a result we are contacting all of our non-Safeguard lenders to bring these changes to your attention and to provide more information on the advantages of lending through Safeguard. It does look like we will be retiring non-Safeguard lending in the future given the popularity of the Safeguard product.