17 May 09 Zopa – that’s more like it
Ever since the banks rained on my pretty miserable parade, I have been seething.
See: Going to Hell in a Ferrari with a bonus stuffed in it’s pocket.
As I understand it the banks in America lent lots of money to people who could not afford to pay it back so they could buy houses they couldn’t afford. Because these people were such a bad risk and couldn’t get a loan anywhere else, the banks found they could charge more interest because they were desperate. So, obscenely the banks made the poor poorer by punishing them for being poor.
But the way America works is that if you can’t afford your mortgage you just leave the key in the door and walk out – no strings attached. And given that every market expert, and even market ignoramuses realised that housing was going to drop in value it didn’t take much to work out that this was going to end in a financial disaster one day.
In the UK the banks took one look at the massive interest rates on offer and ignored the parlous state of the investment proposal and said “I’ll have some of that, in fact quite a lot”.
And then all the borrowers defaulted, all the property was worth less than all the loans and all the banks started falling to bits.
So the bank got the taxpayer to bail out the banks which means I am paying for their greedy stupidity. When they get it right they will keep their own profits while we still pay for the profligacy.
I hate them all and I have been trying to work out how to never have to deal with these shit-heads ever again. I think I might just have found it in Zopa.
Zopa, introduces borrowers to private lenders. Zopa is the financial equivalent of eBay, the auction website: it puts borrowers and lenders directly in touch with one another.
Sixty-three per cent are borrowers and 37 per cent lenders, with about 50 per cent of active lenders having already added to their original lending outlay.
The average gross return for lenders since launch has been 6.83 per cent (including Zopa’s 0.5 per cent fee, but excluding tax). Lenders bear the risk of defaults directly, although bad debts to date have affected only 0.05 per cent of the loans made.
What is more, the risk of defaults is diluted by the spreading of any loan across a number of borrowers. In addition, Zopa carries out full credit checks on all borrowers. The appeal for lenders is not only the prospect of higher rates of return than those provided by banks and building societies but also the transparency of the costs and the control that direct lending gives them over their money.
The benefits for borrowers are that interest rates can be lower than those charged by traditional lenders and that there are no early repayment penalties.
From my perspective another major benefit is that this bank cannot take the whole economy on a handcart ride to hell, because there are no duplicitous plutocrats urinating on the rest of us while they use our money to back the nearest three legged horse in the Grand National because its odds are 5000 to 1.
