Who we lend to

Zopa has more than 16 years of experience in managing risk in the UK personal loans market.

We only approve a loan after meticulous checks. We make thorough assessments, looking at affordability and creditworthiness and working with the UK’s leading credit agencies to reach a decision.

This work is complemented by our risk analysts, who are constantly comparing borrower performance against our expectations so they can tweak our models whenever needed. They are obsessed with measuring risk and pricing it appropriately so that we get our investors as close to our target returns as possible.

Minimum criteria

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 1 year 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. their income)

Risk profiles

Everyone that we approve is categorised based on their risk. The profiles range from A* to E. Our A* borrowers are the most reliable and E the riskiest.

Chart showing all the risk markets for Zopa borrowers, running from the least risky A* to riskiest E.

Zopa Core and Zopa Plus offer you the chance to invest at differing risk levels with different returns. Core invests in A* - C borrowers, while Plus broadens things to A* - E. Here’s what that means in practice.

Our A* and A profile borrowers have a track record of paying their debts on time. 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 10% are secured car loans. Our secured car finance borrowers fall into our A and B risk categories.

Typical average income

Chart showing the typical average income of Zopa borrowers in each risk market, and comparing this to the national UK average income.

Typical loan purpose

Chart showing what loans are typically used for in each risk market, comparing cars, home improvements, debt consolidation and other.

Typical interest rate ranges

We assign interest rates to our loans based on two main factors: the characteristics of the person applying for the loan and the market conditions. Typically, a loan applied for by a lower risk borrower will also have a lower interest rate.

The interest rates below are before our Loan Servicing Fees. Ranges represent around 80% of our unsecured personal loans.

Chart showing the typical rate of interest charged to borrowers in each risk market.

Loan terms

This is the length of time the borrower picks to repay their loan over. The shortest term for a Zopa loan is one year. The maximum term is five years.

Chart showing the minimum and maximum length of loans in each risk market.

Expected annual default rate

We have a dedicated analytics team who estimate potential defaults rates for our borrowers. To make our projections, we use information from the major UK credit bureaus as well as 16 years of our own historical data on loan performance. We overlay this with external factors, such as the economic climate, to work out the probability of a loan going into default. Our models are then reviewed on a monthly basis by our Credit Risk Management Committee.

Chart showing the expected default rate for loans in each risk market.

Projected annual net return

Our projected annual returns are all pre-tax. As investors, you’ll need to declare taxable earnings from to Zopa to HMRC. Tax treatment will depend on your circumstances and may be subject to change in the future. Find out more on our tax and Zopa investments page.

Chart showing the median and range projected annual returns for loans in each risk market.

How do risk profiles and investment products match up?

We split investments into microloans so that no single borrower holds more than 1% of your initial investment. This diversification across borrowers in different risk markets reduces your risk from potential losses. You’ll be matched with a unique portfolio of specially selected loans designed to help you reach your target return.

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.

Graph showing distribution of Zopa Core product risk markets.
Graph showing distribution of Zopa Plus product risk markets.

As of December 2019, this was the split by risk market of active loans in Zopa Core and Zopa Plus. Individual portfolios may differ slightly.