Dedicated to Deposits: Deals, Data, and Discussion

Zopa, the Person-to-Person Lender, Partners with Credit Unions to Offer High Yield CDs

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Update: Zopa Ends Operations in the US. According to Zopa's blog,

Zopa’s US customers’ deposit accounts continue to be insured by the NCUA up to $250,000, and servicing of those accounts as well as the loans will be assumed by the credit unions within 90 days.



Update 2/13/08: The yield on Zopa's 12-month CD has gone down to 4.25% APY.
Update 1/29/08: The yield on Zopa's 12-month CD has gone down to 4.50% APY.

Zopa has parterned with six US credit unions to offer online CDs and loans. Zopa was first launched in the UK in 2005. It's similar to Prosper.com in that it provides a form of peer-to-peer lending. What's unique about Zopa in the US is that they've partnered with credit unions so that the CDs that you purchase through Zopa are guaranteed by the issuing credit union and federally insured by the NCUA.

The current CD being offered by Zopa has a yield of 5.10% APY and a term of 1 year which is competitive as you can see from my weekly rate summary. The details about the Zopa CD are described in their Zopa CD FAQs. It seems to be equivalent to any bank certificate of deposit. The compounding is annual so the rate is also 5.10%. The rate is fixed during the term. The penalty for early withdrawal is 90 days of interest.

Requirements for Buying a Zopa CD

The one thing that makes this different than a bank CD is that Zopa requires you to pick at least one borrower to help. As stated in this Zopa FAQ, "If they want to earn the maximum possible on their Zopa CD, they will help their picked borrowers a little. But the bigger their Zopa CD, and the lower the rate they choose to receive, the more help they give." So I guess the 5.10% APY is currently the maximum rate you can choose. It seems that you're allowed to accept lower rates if you choose to provide more help.

To buy a Zopa CD or to take out a Zopa loan, you'll need to be a member of one of Zopa's partner credit unions. The six credit unions that have partnered with Zopa include Addison Avenue FCU, Affinity Plus FCU, First Tech CU, Forum CU, Provident CU, USA FCU. Most of these credit unions mention this new Zopa partnership on their websites. Most have easy membership qualifications so anyone in the US can qualify. Below is a summary of how you can qualify for membership in these credit unions.

Provident Credit Union Membership Qualifications:

Field of membership includes members of several associations. Some of the associations listed with national coverage include the American Cancer Society and the Sierra Club and Sierra Club Foundation. The Sierra Club has a membership page where you can become a member online. The lowest membership level costs $25.

For those in California, you can be immediately eligible to join if you live or work in one of the following counties: San Mateo, San Francisco, Santa Clara, Alameda, Contra Costa, Monterey, Sacramento, El Dorado, Placer and Humboldt. Also those in Los Angeles City are elibible. Please see the eligibility page for the full details.

Membership into the credit union requires a $10 membership fee, but this is waived if you apply online. A minimum deposit of $25 is required into the share savings account.

Addison Avenue Federal Credit Union Membership Qualifications:

Field of membership includes members of the Financial Fitness Association. There's a $5 fee to join this association.

Employees of certain companies can be immediately eligible to join the credit union. Please see the eligibility page for the full details.

Membership into the credit union requires a minimum deposit of $5 in the Daily Savings Account.

USA Federal Credit Union Membership Qualifications:

Field of membership includes members of the Prime Meridian Association. Anyone can join this association with a $10 membership fee.

You can be immediately eligible to join the credit union if you are an active or retired military member or if you are employed by one of its Select Employer Groups. Please refer to their membership eligibility page for more details.

Membership into the credit union requires a $5 membership fee and a minimum opening savings deposit of $5.

Affinity Plus Federal Credit Union Membership Qualifications:

Field of membership includes members of the Affinity Plus Foundation. The cost of membership is $25.

You can be immediately eligible to join the credit union if you live in certain parts of Minnesota or if you are a student in the Minnesota State University System. Please refer to their membership page for the full details.

Membership into the credit union requires a $10 minimum deposit into the share savings account.

Forum Credit Union Membership Qualifications:

Membership into Forum CU is open to residents of several Indiana counties (including most of the Indianapolis metro area). You can also qualify based on select employer groups and family. Its membership page can be found here with some more details.

Credit union membership requires a minimum deposit of $5 into a savings account.

First Tech Credit Union Membership Qualifications:

Field of membership is open to those who live in any school district of Washington or in Lane County, Oregon. Please refer to their membership page for the full details.

Credit union membership requires a minimum deposit of $5 into the Regular Share Savings Account.


Related Pages: Addison Avenue Federal Credit Union, FORUM Credit Union, CD rates, Provident Credit Union (CA), USA Federal Credit Union

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Comments
8 Comments.
Comment #1 by Anonymous posted on
Anonymous
Apparently Zopa isn't looking attractive to anyone.

I have been waiting to read comments, but none so far.

1
Comment #2 by Banking Guy (anonymous) posted on
Banking Guy
Yea, I guess it's hard to get excited about a 5.10% APY.

Perhaps if they started off with 6% CDs, they would have created much more buzz. Or even 5.50% would have grabbed attention.

If they can hold this 5.10% APY and the Feds keep cutting rates, it may start looking more attractive. I'll definitely keep a watch on this.

1
Comment #3 by Anonymous posted on
Anonymous
It's not really P2P, so not v. new or interesting.

1
Comment #4 by Steven from CA (anonymous) posted on
Steven from CA
...in the process of applying 01/28/07 for 5.10% CD (around 5pm PST) - when page refreshed, rate had dropped to 4.50%, crud.

1
Comment #5 by Banking Guy (anonymous) posted on
Banking Guy
Thanks. I've updated the post. Sorry to see it go down especially in the middle of your application.

1
Comment #6 by carol from CA (anonymous) posted on
carol from CA
I think you are all too cynical about ZOPA. Even though ZOPA rates are now at 3.75% my Fidelity Cash reserves is only paying 2.70%!!
And Credit Union CDs equivalent CDs are under 3%
So the rate is still better..and I'd rather put my money into a non-profit then into the already bloated for-profit financial industry, the Fidelity and Merrill Lynch'S.
And if I'm willing to accept 3% [which is still higher than the Money Market funds], I can actually help an individual [whom I select].
It's part of socially responsible investing, folks...

1
Comment #7 by Anonymous posted on
Anonymous
The percentage rate mentioned in the article is the long-term return I think, not taking into account the fact that the returned capital from the loan as payments are received can be re-lent.

In the UK we have ISAs on which the investment income is not taxed (but are limited to max cash £3,000 investment PA). The rates on these are typically 1.5%pa at the moment.

Zopa's 5.1% return, even with higher-rate tax paid on the interest, outperforms even the most competitive tax free savings currently available in the UK.

Plus it's "sticking it to the man", which is really nice right now!

1
Comment #8 by Anonymous posted on
Anonymous
They are the worst credit union ever. I have had customers come into my place of work where we do auto loans and have affinity give a customer a 9% loan in a used car. When we are able to get our customer 5.79%, then credit union memeber calls Affinity adn they drop there rate to match ours. Tell me does that show integrity? They do this all the time to our customers and then tell them that our loans have pre-payment costs associated with the loans. We do not have any of these on our loans, and they are all simple interest. Look at loans at your local trustworthly car dealership before you rush to affinity to get an ear full of lies and dishonesty.

1