Web-based peer-to-peer (p2p) lending platform Zopa has passed £250m in total loans arranged, having recorded 90% year-on-year growth in October, and now claims to account for 2% of all UK personal loans.Meanwhile, Rate-Setter, another emerging leader
in the online p2p market reported a record month in October, clearing £3.6m in loans and taking the company past £40m of loans created.
Both companies report nearly half this lending is marked for car purchases: 46% of all RateSetter loans – "a considerable chunk" – goes toward buying a car, a company spokesperson said, as has 47% of Zopa loans year-to-date. "Historically, it’s the biggest purpose for loans," agreed a spokesperson for Zopa.
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Giles Andrews, chief executive of Zopa, said the numbers showed "increasing numbers of people are looking beyond the banks to find the best savings and borrowing rates", and claimed the average fixed rate of return on loans made over the past 12 months was 5.4% after charges and average defaults.
Zopa claims the average personal loan arranged through its platform is 20% cheaper than that offered by banks, while lenders’ returns beat those of fered by savings accounts. The Zopa model charges lenders 1% a year of the money lent, with borrowers paying a fee fixed by the amount and length of the loan.
All borrowers are identity-checked, risk-assessed and credit-scored (by Equifax, Experian and Callcredit) and borrow no more than £10 from any one lender, to which the company attributes the 1% default rate on unsecured loans.
The monthly figure for Rate-Setter is up from £3.25m in September, itself 25% up on August. Across the two months, RateSetter claims to have been responsible for more than 30% of p2p consumer loans, during which it passed 150,000 users.
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By GlobalDataSuch a lending model was recently considered at a Motor Finance panel discussion on the future of car finance provision and has risen to a £350m-plus market this financial year, with borrowers now asking for £1.2m every day, according to RateSetter’s statistics.
Speaking at the discussion, Fraser Brown, general manager of the Cumbria sites of Border Cars, said: "Peer-to-peer lending
will grow," with brokers "looking to tap into the market and translate that into a motor industry solution.
"If I’ve got £20,000 earning low interest in the bank I can put it into a peer-to-peer site with a likely idea of risk and return. If somebody could work with one of these organisations or websites like a broker, and structure some money to come into the motor industry,that’s a really interesting concept."
Rhydian Lewis, co-founder and chief executive of the company, explained consumers understood "the advantages of p2p", including the "simpler and safer" lending model.
That model also includes strict lending criteria – less than 20% of borrowers are approved – and an average loan of £3,972 over 28 months with representative APR between 7 and 10%. To protect lenders further, RateSetter operates a provision fund of £650,000,
covering late or missed payments, which is currently running at 0.3%.
The average deposit from peer lenders is currently £11,000, with an interest rate of between 3.2%, for monthly access, and 6.5%, on a five-year bond.
The company is also a founding member of the Peer-to-Peer Finance Association alongside Zopa and Funding Circle, which passed the £50m mark in new lending at the start of November, including £12m lent in August and September, and the £60m mark by the end
of the month.
Funding Circle, which, like RateSetter, was established in 2010, has also urged intermediaries to look at its business in the wake of the withdrawal from lending of ING Lease in the UK. Accordingly, the company has begun an increased commission of 4% for brokers
of asset finance deals, plus a 1.5% bonus for hire purchase loans, until the end of January.
richard.brown@timetric.com
