Who we lend to
Zopa has more than 14 years of experience in managing risk in the UK personal loans market.
We have a dedicated team of risk analysts who interrogate borrower performance against expectations and regularly tweak our models. They are obsessed about measuring risk and pricing it appropriately so that we generate the target returns for our investors.
At Zopa, borrowers must meet a number of minimum criteria in order to be eligible for a loan:
- Be at least 20 years old
- Have credit history we can see
- Have a good track record of repaying debt
- Be a current UK resident
- Have 3 years of address history in the UK
- Be employed, self-employed or retired with a pension
- Have an income of at least £12,000 per year (before tax)
- Be able to afford the loan (based on an assessment of their current financial commitments vs. income)
On top of these minimum criteria, Zopa also classifies borrowers into different risk profiles depending on the associated level of risk.
Our A* and A profile borrowers repay their debts on time and have never missed a payment. They have a well-established credit history and their debt-to-income ratio is low.
Our D and E profile borrowers have a similar debt-to-income ratio as the B and C profiles, with their income typically around the UK average. D and E profile borrowers may also be people with limited credit history.
Although the majority of our loans are unsecured, less than 5% of are secured car loans. Given their risk, we classify them under our A profiles.
Typical average income
Typical loan purpose
Expected annual default rate
In the current economic environment. Based on weighted average interest rates and bad debt estimates by risk market for August 2018.
Projected annual net return
After expected losses and our loan servicing fee. Based on weighted average interest rates and bad debt estimates by risk market for August 2018.
How do risk profiles and investment products match up?
Zopa's model of splitting investors' money into microloans (between £10 and 1% of your total investment) means that across all our products your money is lent to a range of borrowers in different risk profiles to diversify your money and reduce the risk of potential losses.
Investors selecting Zopa Core invest in a range of A*–C loans. Investors that choose Zopa Plus will see around 10-20% of their money lent out to D and E profiles, which carry a higher level of risk in exchange for higher projected returns, even after expected defaults, with the rest lent to A*–C borrowers.
Investing with institutions
Whilst individuals account for approximately half of funds in Zopa's loan book, we also have a variety of financial institutions that invest money through Zopa.
We treat institutions just like individual investors. There's no cherry picking of loans and they get the same mix of loans as we offer to individuals.
Both our retail customers and institutional customers invest in A*-E rated loans. Whilst D and E profiles are only open to Zopa Plus investors, the overall share of D and E rated loans which are available to our retail investors is in line with their share of total disbursals.
If there is insufficient demand for Zopa Plus from our retail investors then institutions will take the excess D and E profile loans.