Borrowers turn to Zopa rather than High Street banks

According to a recent report many borrowers are turning their backs on High Street banks in the UK when it comes to borrowing money, and are instead looking at other options and ways of getting the finance that they need. The report was released by the website, Zopa, which is a site that allows consumers to lend money to one another and has been running for the past five years.

Officials from the company have said that with confidence in the banking system has plummeted, and this has affected the amount of business that it has seen over the past year. In addition to this the UK’s High Street banks have become far more restrictive with regards to granting loans and finance to consumers, and many people have turned to Zopa because they do not feel that they would be able to get affordable finance – or in some cases any finance – from the traditional banks.

The person to person lending strategy that Zopa uses appears to be successful, as the company has processed nearly £71 million worth of loans in the past five years, and over half of these were processed in the past twelve months as consumer confidence in the regular banking system has continued to fall. Another factor contributing to the increase in business is that many people feel that they will get better returns on their money by lending to others than putting it into savings at the low levels of interest currently on offer.

The typical returns being made by those lending money through the site have been 7.9 percent, and the level of defaults have remained low at just 0.7 percent. Those lending the money will be able to see which credit group the borrower falls into before deciding who to lend to.