How Zopa minimises risk
Consistently outperforming default expectations
Introduction to risk
Zopa has an unrivalled track record of performance in the personal loans asset class. We minimise our investors’ risk in three ways: a prudent credit risk policy, diversification and an effective, recoveries policy.
At Zopa we've been lending for more than 10 years, and have an unrivalled track record of performance. We help lenders minimise risk in three ways:
- We only lend to sensible borrowers who meet our strict criteria that have been developed over our 10 years.
- We diversify your money by splitting it into smaller amounts - micro loans - which are lent across a range of borrowers. We do this to ensure that only a small amount of your money is lent to an individual borrower, so if one borrower cannot repay their loan, this will only impact one micro loan in your portfolio. This reduces your risk and provides you with much more stable returns.
- If a borrower does miss a payment and goes into arrears you don't need to do anything: we'll investigate and take the necessary action. If a borrower misses four consecutive payments, the loan is defaulted. Our Safeguard fund was set up in 2013 to protect lenders by paying back loans that default, so you can get your capital and any interest owed. It's not a guarantee, but it has covered 100% of eligible loans to date.
And unlike a bank, we publish our loan book performance data in full for anyone to see, because we believe in being held accountable for our performance.
“The longest-running site, with good rates and risk spreading.”— Martin Lewis, MoneySavingExpert.com
Zopa investments fund personal loans
We only invest your money in personal loans. It’s a type of investment that we have over 11 years’ experience in, and we use the results that we’ve achieved in the past to inform our lending policies.
When you invest your money, your capital is at risk and is not protected by the Financial Services Compensation Scheme (FSCS). Our risk statement has all the details.
We put your eggs in many baskets
When you invest through Zopa, you don’t lend all your money to one person. It’s lent out in chunks, starting at £10. This means that if you invest £1,000, no one person would have more than 1% of your overall investment.
This diversification is especially important for investors not covered by Safeguard.
Managing missed payments
We always try to help our borrowers get back on track should they miss a payment. If they reach 4 months' worth of missed repayments, their loan is classed as a default and we begin our recoveries process.
For Access and Classic investments, Safeguard steps in and buys the loan, repaying your capital and up to 4 months of missed interest.
There are some restrictions around Safeguard, and it is important to know that Safeguard isn't a guarantee.
For Zopa Plus investments, which are not covered by Safeguard, after 4 months of missed payments, we would count the default as a capital loss (some of your original investment would be lost), and this amount would be deducted from your Zopa Total. We’ll still work to make recoveries on these loans, and anything we do recover will be added to your Zopa Total.
We've been operating since 2005.
We firmly believe in transparency in order to be held accountable to our customers and regulators. Our operational risk mitigation policy is available to everyone here.
If Zopa were to go out of business, we have planned to use loan servicing fees to cover the ongoing costs of managing our loan book.
We've been operating since 2005. Zopa Limited is authorised and regulated by the Financial Conduct Authority (firm registration number 563134).