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An Unequal Toss Up Between Zopa And Lending Works

By Matthew Howard on 3rd November, 2017 | Read more by this author

When considering P2P lending websites that focus exclusively on straightforward UK personal loans, you've basically got the choice between Zopa, Lending Works*, Lendable and Madiston LendLoanInvest.

Which is the best personal loans P2P lending site? Lendable provides no information on which anyone can assess the risks. Madiston provides just a fraction more information. Still inadequate.

So that leaves us with just Zopa and Lending Works. However, these are great choices to have. Here's how they compare:

Item Zopa Lending Works
Total ever lent £2.7 billion £76 million
Minimum lending amount £1,000 £10
Diversification Your risks are spread across at least 100 loans Your risks are automatically spread across thousands of loans
Interest rates Zopa Core: 3.7% target rate after bad debts;
Zopa Plus: 4.5% with higher-risk borrowers
4% for loans up to three years;
5.5% on loans up to five years
Proportion of loans that have gone late or bad in past two years 40/1,000 30/1,000
Significant protections None Reserve fund valued at 2.7% of outstanding loans;
Unemployment insurance
Available in an IFISA Yes Yes
New lending situation Currently a long waiting list for new lenders New lenders currently accepted

Zopa has a much longer, bigger history. Starting in 2005, it measures its loanbook in the billions of pounds. Lending Works' is still under £100 million, but it is easily large enough and old enough for us to assess their skills and performance.

Lending Works' spreads your risks across thousands of loans – its entire outstanding loanbook – even if you're lending just £10. That's impressive. Spreading your risks is incredibly important.

(If you're confused because you've started lending through Lending Works and you've just got one or two borrowers allocated to you, here's how the diversification works. Initially, you might lend to just a few borrowers, but in the event of high bad debts Lending Works pools all outstanding loans together, with all lenders sharing the risk of all loans.)

Zopa's “target” lending rates need a little explaining: Zopa actually charges borrowers up to 33% interest. The target rate reflects Zopa's expectations of the lending interest you'll earn after bad debts.

We use Zopa's detailed loanbook showing all of its 200,000+ loans ever approved. However, Zopa has not given us enough information to break down its loans to see which ones go to its Zopa Core product and which go to Zopa Plus. Therefore we can't easily split the bad debts between the two products.

This is a shame, because it makes most sense to compare Zopa Core alone to Lending Works' two accounts. Zopa Core focuses on the lowest-risk borrowers only. Lending Works' two accounts are rather different in that they are not split by the risk of the borrowers. Lending Works' focus is on prime borrowers only. Instead, its accounts are split by the length of the loans.

Zopa and Lending Works both have attractive performance in terms of the proportion of loans that have gone bad or late, at just 40 and 30 loans out of 1,000, respectively. In a way, this is not surprising. It is easier for smaller P2P lending sites to be more selective of better borrowers – at least when they are competent. This has been demonstrated many times in P2P lending's history already.

That said, 4thWay's experts estimate that Zopa Core would probably be closer to 30 loans out of 1,000, if Zopa offered us enough information to figure that out.

Lending Works has a clear edge when it comes to additional protections. Zopa offers none, after dropping its reserve fund recently, whereas Lending Works has a reserve fund to cover expected bad debts. Roughly half of the reserve fund is in future payments from existing borrowers, but even if an incredibly high 15% of those borrowers were to become unable to pay, the future payments would still ensure Lending Works reserve fund is very sizeable.

Lending Works also has insurance to pay for bad debts in a variety of circumstances. For the most part the insurance probably isn't very valuable, but it could well take a large part of the edge of losses during a recession, when it will cover at least some borrowers repayments if they are unable to pay due to losing their jobs.


I really like both Zopa and Lending Works as ways to diversify in low-risk lending. But, based on the above, and the overall high, professional standards of risk and borrower assessment at both P2P sites, I think that Lending Works currently has the edge.

Visit Lending Works* or read the Lending Works Review.

Visit Zopa or read the Zopa Review.

Read How Lending Works’ Insurance Against Losses Works.

*Commission, fees and impartial research: our service is free to you. 4thWay shows dozens of P2P lending accounts in our accurate comparison tables and we add new ones as they make it through our listing process. We receive compensation from Lending Works and other P2P lending companies not mentioned above either when you click through from our website and open accounts with them, or to cover the costs of conducting our calculated stress tests and ratings assessments. We vigorously ensure that this doesn't affect our editorial independence. Read How we earn money fairly with your help.

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