en-us http://backend.userland.com/rss Your Friends @ Myvesta.org.uk (stever@myvesta.org) myvestaukblog_archive.html stever@myvesta.org 114418558860692904 Zopa, the online borrowing and lending exchange, is to start charging customers for using the service, taking some of the shine off its offer.

Both borrowers and lenders will pay a 0.5% fee on the amount of the transaction. Borrowers will pay upfront on the loan, while lenders' payments will be spread over the first year of repayments.

Borrowers will start paying the fee from April 6, while lenders will pay from April 13. However, founder members of the service will still be able to lend fee-free for life.

Previously, Zopa – zone of possible agreement – has made its money through Payment Protection Insurance. It did have a 1% charging structure for borrowers in place but this has been waived for the past 11 months.

The service has proved popular since being launched in March last year. So far, around 63,000 members have used the service and it is growing at a rapid rate.

James Alexander, UK chief operating officer, said: 'We wanted to make the charge fair, simple and not 'banky'. This charge is upfront and transparent and means we still have the most competitive rates on the market.'

It works by putting lenders and borrowers in touch with each other to avoid having to use a bank or building society.

The nature of the service means that it is often possible to borrow small sums at much better interest rates than High Street banks would be able to offer.

Loans can be for as little as £1,000 or as much as £25,000, although the average sum is £5,000. Lenders can put up between £500 and £25,000, but can only loan £250 to any one individual to limit the risk of defaults.

The average return for lenders is 7% gross, a better rate than most saving accounts offer.

Borrowers are split into two groups depending on their credit rating. Those with solid credit records are classed as A borrowers, while those with slightly tarnished records are put in the B category.

If a member lends or borrows money before the cut-off point then they will avoid the fees.

http://www.myvesta.org.uk

Michael Clarke, This is Money
3 April 2006