Matching your money
Once you've selected a product, your money joins the queue and waits to be matched. This can take up to a week (longer in peak times), but typically takes a few days.
Your investment then gets broken down into £10 chunks or up to 1% of the total amount you have invested. Why? So we can spread your money across multiple loans, diversifying your portfolio.
Every month, borrowers pay back capital and interest on your loans. These repayments can be recycled in new loans or withdrawn.
Keeping re-lending on recycles your repayments in the same investment product. Your new loans will always be at our latest rates, meaning that the overall rate on your loan book will evolve over time.
Lending at Zopa is simple; everything happens automatically. Here's how it works...
Your money enters a queue with other investors to be matched and lent out to approved borrowers. Once it reaches the front, it is split into micro loans of at least £10 to diversify your money.
Each month borrowers make their loan repayments, paying you back a portion of your capital plus interest. Borrowers repay on different days so money is coming into your account throughout the month.
Once you've collected enough repayments to buy a new loan your money will be automatically re-lent to new borrowers, so you're now starting to lend and earn money on your interest.
Each loan is repaid at a fixed interest rate, but your repayments will buy new loans at the latest market rates. This means your rates will evolve with the market as you re-lend.
Once your money has been matched it’s lent at a fixed rate for the duration of each loan contract. As money is gradually paid back it will be re-lent at the latest rates (or you can withdraw it). This means that the rate you get on new lending will follow the latest product rates.
Direct lending also means you have a loan contract with each borrower. The rate in the contract is fixed for the duration of the loan contract, which can be up to 5 years.
Moving between products
It's easy to move money around in Zopa.
Turn off re-lending and allow your repayments to collect within your holding account. Then allocate those funds to a new product. Or, sell your loans and purchase new ones within a new product.
Zopa provides an annual statement to make it simple to declare your earnings to the HMRC for tax purposes. The amount of income tax payable is dependent on your individual circumstances and may be subject to change in the future.
From 2016/17 tax year lenders with the Zopa Plus product and no Safeguard cover will be able to set any losses that they incur against income from their other loans thanks to the Personal Savings Allowance.