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Zopa Now Live In The U.S. – All Loans are Insured CDs
After we broke the story that Zopa was en route to the U.S., their plane has finally landed at JFK and they are now open for business in the U.S. The big question that everyone was puzzled about was how they would federally insure loans. That question has been answered.
Loans that are federally insured will be through the Zopa CD up to currently 5.1% depending on which loans you back inside the CD. Zopa describes the CD as, "A Zopa CD is guaranteed and insured way to earn a fixed rate of return for a fixed term. Compare it to a "certificate of deposit" at a bank or a "termshare certificate" at a credit union. But it’s different, too. Because your Zopa CD directly benefits the borrowers you pick by reducing their monthly loan payments."
So there is the entire program. It’s different than Lending Club and Prosper and Zopa in the U.K. because it works completely on loans that are backed by CDs which are taken through a variety of credit unions in the U.S.
If the best I can do is a 1-year term at 5.1%, why not just go to a local bank or ING Direct who currently are at 4.7% with no hassles? I guess it’s all about the idea of not only making a return on the CD but also helping someone in the Internet community.
I was not very impressed with the returns that Zopa is offering lenders, but it is risk free. I personally don’t see much point in taking the time to open up an account with Zopa to make 1/3 of a percent more than my current credit union is offering.
However, from a borrower’s point of view, the deal can be fantastic. Some borrowers are receiving enough help from lenders that the borrower is actually “paying” negative interest. I can’t think of anywhere else a person can be paid to take out a loan.
This is barely P2P. It’s really just an online Credit Union.
Depending on how long the yield lasts, a 5.10% APY is currently a pretty good rate.
It is guaranteed so you don’t have to worry about whether or not you will get your investment returned.
You get a warm fuzzy because you are helping others.
But other sites (Prosper) allow you take some risk for a higher return. So with all investments, it is probably prudent to spread it around. Zopa probably won’t put a big dent in Prosper’s business, but provides a nice alternative for people to diversify.
ChrisCD
Jumbo CD Investments, Inc.