At the same time as allowing investors the choice as to whether they require the protection of Safeguard, with the associated cost, Zopa is also offering retail investors access to their band D and E loans which were hitherto only available to institutions. These bands represent a higher gross lending rate to compensate for an expected higher level of losses. Whilst these loans might be more volatile through cycle, they may also offer higher net returns. It is also interesting to note that the new ‘access’ product offers no fee to sell loans. This follows on from a similar announcement from RateSetter only yesterday.
Taken together these changes represent Zopa offering much wider choice and flexibility to their customers.
These changes were first trailed by Zopa’s CEO, Jaidev Janardana, when he spoke to AltFi back in November 2015 when HMRC first revealed the proposed amendments to bad debt treatment. At the time Janardana explained:
“[The changes] will allow services like Zopa to offer a wider choice of lending options, such as re-introducing our proven and trusted non-safeguard lending option that operated in the first 8 years of lending (2005-2013) and delivered a positive return during the financial crisis. Many of our lenders tell us they would prefer to earn higher returns on loans without Safeguard, and with this tax change we look forward to being able to offer more choice to lenders so that our products better fit their individual needs and appetites. We have been working with our lenders to design and test new products that we expect to launch next year.”
Today Andrew Lawson,Zopa’s Chief Product Officer, elaborated, “Zopa’s new products are designed to provide more choice for our customers, whether they’re seasoned Zopa lenders or new to peer-to-peer lending. We’ve listened carefully to feedback from our customers to create a range of products we believe will deliver the right balance of returns, risk and access. Even more exciting is that we’ll be able to offer all three products within an ISA, which will help UK consumers get even more value from their hard-earned money.”
Further detail about the new products is outlined below:
Zopa Access
•Safeguard lending - Yes
•Returns - Around 3-4% after expected defaults
•Access – No fee to sell loans
•ISA eligible – Yes
Zopa Classic
•Safeguard lending – Yes
•Returns – Around 4-5% after expected defaults
•Access – 1% fee to sell loans
•ISA eligible – Yes
Zopa Plus
•Safeguard lending - No
•Returns – Around 6-7% after expected defaults
•Access – 1% fee to sell loans
ISA eligible - Yes
