The Power of Direct Lending

Did you know that in the last month or so that you could go online to a Lending and Borrowing exchange? No! Well now you can as the website Zopa will put anybody who wishes to borrow money onto the lenders who are champing at the bit to lend people money and if any connections are made Zopa will receive a fee of around 1% on any of the loans made.

The thing is, the borrowers of the U.K in particular are sitting at a dangerously high level of debt as well as their mortgages at the moment, is causing a bit of concern that they may go over the parapet and head long into financial trouble.

Though Richard Duvall the chief executive of Zopa was stated as saying that rather than deal with faceless corporations, people could now take control of their own borrowing. The thing that worries me is that some people have the overriding urge to borrow, borrow, borrow and with having the control over their own borrowing, may lead them into a heavy debt that they cant pay back. And with the British public already in personal debt of a record breaking £1 Trillion plus, should treat this new set up at Zopa with the ultimate caution.

Lets look at the way that it has been set out to work, the lenders will set out their own interest rates and will pick and choose the borrowers that they want to lend to, thus meaning if they want to lend to a borrower who they feel who are going to be of a higher risk, then the rate of interest will be of a higher scale, or they may feel that they do not want to take that risk and refuse the borrower the loan.

Zopa is really for people who like the feeling of having the power over the way that they deal with their own finances, who will feel the need to sort of “wheel and deal” a better rate for themselves, by not dealing with a middleman who needs paying.

The Office of Fair Trading issued a credit licence to the Financial Services Authority, who had given the go ahead to the setting up of the Zopa website.

16/4/05