Unlike conventional bank loans, Zopa loans are financed by other consumers willing to risk lending to individuals to beat the returns currently on offer from savings accounts.

The company’s figures indicate that the average annual return received by Zopa lenders over the last 12 months has been 6.5%, and that the default rate is less than 1%.

Over three years, the current headline representative APR for a £7,500 loan from Zopa is now just 6.1% (fixed). Including the £10 arrangement fee, this means that you would pay back a total of £8,205 over the three-year term.

What’s the deal?

Unlike some deals, Zopa’s table-topping rates are not limited to those borrowing £7,500.

In fact, whether you are looking to borrow £5,000 or £10,000 over three years, Zopa remains the market leader – even though you will pay a higher representative APR of 7.7% (fixed) for a £5,000 loan.

If you wish to avoid further interest charges by repaying your loan early, Zopa is also the only lender in the marketplace at the moment that does not penalise you with early redemption charges.

A new survey of its customers reveals that this flexibility is the reason many of them choose to borrow through the company, which has arranged loans worth more than £160million since its launch in March 2005.

Others, meanwhile, are attracted by the possibility of bypassing the traditional banking sector – as well as the low interest rates.

Any catches?

While Zopa is ahead of the competition when it comes to unsecured three-year loans, its rates are not as appealing over the longer term.

Someone looking to borrow £5,000 over five years, for example, could pay a representative APR of 8.0% (fixed) with Alliance & Leicester or Sainsbury’s Finance.

This would mean monthly payments of £100.72, making the total amount repaid over the term £6,043. With Zopa, on the other hand, the same loan would come with a representative APR of 8.3% (fixed), putting monthly payments at £101.45 and the overall repayment amount at £6,087.

What’s more, on a£10,000 loan over five years, Zopa drops way down the list with a representative APR of 7.8% (fixed), compared to the market leaders at around 6.3% or 6.4% (fixed).

This makes it a much more expensive option than a loan from Nationwide, for example, despite the building society this week announcing plans to increase its representative APR on loans of between £7,500 and £14,999 to 6.4% - or 6.3% for FlexAccount customers.

A quick look at the figures makes the difference clear as, even at the new representative APR, a Nationwide loan would cost a typical borrower £194.34 a month or £11,661 overall, and a FlexAccount holder £193.91 a month, or £11,635 overall

Borrowing the same amount over the same term with Zopa, meanwhile, would cost £200.63 a month, giving a total of £12,038.


Zopa is a great option for anyone looking to borrow between £5,000 and £10,000 over three years.

Its customers also enjoy the freedom of being able to repay their loans in full at any time without incurring penalties, which could save you a lot of money if you have an unexpected windfall, for example.

However, if you would prefer to spread your loan payments over the longer term, a more traditional lender such as Nationwide, Alliance & Leicester or Sainsbury’s Finance will give you a better rate.

Top tip

If you are interested in lending money through Zopa, then you can have peace of mind that the site uses all the safety measures banks use, and a few more.

Any money you lend is split over multiple credit-checked borrowers in small chunks, which minimises the risks involved. You set your rates and can choose whether you want to lend for three or five years.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.