When a lender's money enters the system, Zopa automatically loans it out as a series of micro-loans to approved borrowers, explains Zopa. Borrowers repay the capital with interest each month. No more than 2 percent of a lender's money goes to any particular borrower. Zopa has a fund to protect against arrears and defaults.
After a lender collects enough repayments, Zopa automatically lends to new borrowers so that the interest earns money as well, states Zopa. The annualized expected return on money lent out is 5 percent.Learn more about Personal Loans