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An article relating to this blog post on Finextra:

P2P lender Zopa reports soaring uptake as credit crunch bites

As the credit crisis forces traditional banks to tighten their lending criteria, UK P2P loan market pioneer Zopa is reporting soaring interest from both borrowers and lenders.

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Borrowers, I understand - but lenders???

I'm not surprised that borrowers are seeking alternatives, but I must confess that I'm a little confused about what would motivate lenders to consider "alternative" opportunities at this stage. Maybe I'm too conservative.  Maybe I've spent too long at a big bank. Either way, I really hope the direct model works, grows and never bites the hands that feed it...

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A Finextra member
A Finextra member 13 October, 2008, 10:34Be the first to give this comment the thumbs up 0 likes

1. The returns for an individual as lender are better. Where else can you get 10% at relatively low risk? Average default rate round 0.5%.

2. There is no middle man to go broke (ie a bank).

3. It generally works through spreading the loan(s) and the risk across many lenders and borrowers. Sort of like a bank without the CDS's....

4. The costs for the borrower are lower.

Sounds lke a recipe for success.

It's still early days and there will be hiccups but it's going to be bigger than Ben Hur.

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