Just What Is Zopa?
Zopa, which gets its name from the business acronym for "zone of possible agreement," calls itself the world's first online social finance company. Though Zopa got its start with a slightly different format in the UK, it is a U.S.-based company with operations in Italy and the UK, as well as here in the U.S.
More than 175,000 people have joined Zopa since the company's launch in 2005.
How Does Zopa Work?
Borrowers obtain unsecured personal Zopa Loans, with substantially lower rates than credit cards or loans from big banks. Borrowers can publish a personal profile that contains details about their situation and the reasons they are borrowing. That profile is designed to be shared with friends, family, colleagues-and other Zopa participants who might be interested in helping them-via the Zopa web site, other social networking sites like Facebook and MySpace, or a consumer's own blog. The more people who see that profile, the more "help" a borrower is likely to receive, and the lower their loan payments will become.
Investors, by purchasing a Zopa CD, become "helpers." They pick at least one borrower to help and, by adjusting the rate on their Zopa CD, they can increase the amount of "help" they contribute to their borrower(s) in the form of a credit toward the borrower's monthly loan payment. In this way, investors can help other people while still enjoying an attractive, guaranteed and insured return. Whether a borrower repays his loan on time has no effect on what an investor earns.
Credit unions get the opportunity to reach out to the "next generation of credit union members" through next-generation web technology. The Zopa CDs and loans will be held on the credit union's books. Zopa does all the servicing, but the CUs do open accounts for the members.
