Zopa, an online borrowing and lending exchange that was launched last year, is gaining popularity. It has already attracted around 48,000 members. Zopa helps to close the gap between borrowers and lenders. Zopa is an acronym of Zone of Possible Agreement.

Borrowers can choose their lenders on the basis of the interest rates that the lenders are charging. Lenders can choose borrowers to whom they want to lend on the basis of the borrowers’ credit worthiness. Credit worthiness of borrowers is determined by credit rating agencies. Lenders charge interest rates on the basis of borrowers’ credit worthiness. Borrowers with a good credit rating are charged low rates of interest.

A lender lends his money to a number of borrowers through Zopa. This reduces his risk since default in repayment by a borrower or two does not create much of a problem for the lender. Zopa charges a fee from borrowers, which is 1% of the amount borrowed. No fee is charged from lenders. Zopa now offers an interest of 3.25% on lenders’ money even before the money is borrowed.