Zopa launches cheapest-ever personal loan

You can now get a rate of just 4.4% – the lowest ever – from peer-to-peer lender Zopa.

Zopa has cut the representative APR of its medium-sized personal loans down to just 4.4%, the lowest rate ever offered.

The rate is on offer to borrowers looking for a loan of between £7,500 and £15,000 over a three- to five-year term.

Here’s how Zopa’s loan compares to the other leading deals on £10,000 personal loans over a five-year period at the moment:

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Will I get the rate?

The trouble with representative APRs is that not everyone gets them. Lenders only have to offer the rate to 51% of successful applicants. So being approved doesn’t mean you’ll get the lowest rate ever!

However, there is something to bear in mind when it comes to Zopa. The peer-to-peer lender offers ‘soft search’ quotes, which will tell you what rate you’ll be offered, without leaving what's known as a 'footprint' (a written record, essentially) on your credit score. So if you aren’t offered the 4.4% rate you can apply elsewhere, without worrying about other lenders seeing a record of your application with Zopa.

Another plus point is that, unlike other lenders, you can pay back your Zopa loan early without being whacked with early repayment charges.

So that’s a market-leading rate, flexibility to pay off your loan early and freedom from the threat of a nasty black mark on your credit score if you don’t get the rate you want!

Compare personal loans with lovemoney.com

How peer-to-peer lenders work

Zopa is one of the UK’s biggest peer-to-peer lenders, a form of arranging finance that is proving a healthy alternative to the high street banks.

With a bank, if I deposit money in a fixed rate savings account, that money is then used to fund the bank’s lending activities. And the bank will be charging a much higher rate of interest on its loans than it’s paying me in interest on my savings.

With peer-to-peer sites, the bank is cut out of proceedings. Instead I lend the money directly to borrowers, and everyone gets a better deal. I get a better rate of interest than with a bank and the borrower gets a lower rate on their loan.

It’s worth bearing in mind that peer-to-peer sites are not yet regulated by the Financial Conduct Authority (although that changes in April). Also, your cash is not protected by the Financial Services Compensation Scheme, although most of the main peer-to-peer lenders have a form of provision fund which sets cash aside to cover your money if things go wrong.

Compare personal loans with lovemoney.com

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Flexible personal loans: is it worth paying extra?