concerned about the amount of default and non-payment (Z)

I guess the first question might be are you selling perhaps or have only been investing for more than a few months now perhaps. Usually what happens is that defaults will start to arrive after approx 6 months of investing say - not every one is affected in the same way though (This was out ISA's examples). The reason for the delay is non/missed payers have to miss at least 4 months of payments before Zopa even considers they are bad payers (defaulted). There is >90 days flag in our loanbook data that will usually show those loans that might be defaulted within the next month or so - they will be marked with the Default status flag in the loanbook. The default date in the loanbook will give a view of this too. sadly they have now removed the comments field that was quite revealing in the past.

There are some recent caveats in that loans marked as "covid affected" have a different criteria and may not be defaulted in the normal scheme. You can see some info in the current loanbook glossary on some of these states of a loan. 

Usually one gets defaults start to ramp up, depending on how much is invested, after about 6 months or so - it is not an easy thing to gauge as each lender will have individual circumstances and different loans. There are certain actions that exacerbate the default levels if one is looking at it closely by months say. In my case I have some months where the defaults are so large in comparison to the interest returned that its not unusual to get double or more of a months interest wiped away in new defaults. There are reasons for this - in mine and Mrs aju's case we removed a lot of money from Zopa a couple of years ago to start investing in the better rates on ratesetter so te defaults started to have more of an effect as monthly return interest reduced relative to the number of loans left. This resulted in less interest arriving and added to that defaults will always be part of the whole mix but in this scenario new defaults start to weigh much heavier on ones lowered monthly interest returns - less loans returning less interest etc. Add to this that we stopped all new lending and moved into draw down mode at the start of the covid saga last May - we were late to the party - as we have removed funds and the defaults increased then some of accounts started to get >1000% losses in some months. Whilst our non ISA's are now giving positive, yet small returns monthly our ISa's had more funds and are still suffering as there are defaulted loans ramping up the losses as mr sunak and co change the rules etc -  i think that's right. One thing that also hit us quite hard was selling loans off in may the Market Rate Adjustment clobbered us way more than we were happy with but sadly it was too late - one lives and learns and now we are just drawing down naturally.

To balance default losses out a little every so often there is a default sale - where everyone with defaulted loans in the sale are returned some money some of those will help even though you will not be able to equate them to actual defaulted loans though.

Sorry if this is not the best description of things but we still have nearly £5000 across our 4 accounts steadily being withdrawn at a rate of about £200 total every 3 weeks or so and we are still picking up defaults every few days or so. Fortunately in our case we are not losing capital because we had a lot of really good returns since the Zopa start and all of the money we have still locked in now is earned money but none the less it's not as good as it might have seemed 2/3 years ago. I'm guessing things will improve as the economy improves but it may be quite slow.

Thats our take on our defaults experience.

Just checked Mrs Aju feb/Mar returns on the ISA and the defaults wiped away almost 5 times the interest earned. It does go a little up and down though some months are better than others.

You're likely to see some defaults and possibly more so at the moment as the Covid payment holidays come to an end. Whilst it's hard to do you should probably look at the situation over several months and see how the whole loanbook is going rather than concentrate on a single month.

I think April is an unusual month for me in that I've not seen any defaults (so far). I've had plenty of months in the last year where the defaults have been a significant portion of the interest. Last month (March) almost all of my interest was wiped out by defaults. I think all those defaults were for loans made before the start of the pandemic, probably to people who were seen to have stable jobs and low risk of defaulting.

If your loanbook is smaller then it's likely you might see larger swings month to month as it might only take a couple of larger defaults to take out all your interest.

In general Zopa seem to have done a reasonable job at managing who loans are made to, they managed to make it through the 2008 financial crisis and I see no reason to think they won't survive the pandemic. They certainly do chase missed payments and defaults (although I don't know to what degree) and I have seen some payments from defaulted loans, the ability for the borrower to pay is going to be the limiting factor there though. In some cases I think plans have been setup where the loan is still paid off but over a much longer time than originally expected (and will be dependant on what's affordable). There have also been sales of debt in the past (I don't know what the criteria are or what the return is).

A lot of the processes around risk, defaults etc should be detailed in the FAQs and in the terms. They're probably the best places to look for detailed and accurate information.

thanks everyone, i have been with zopa and ratesetter for about 5 or 6 years, both had some kind of safety net at the time. I managed to "catch" leukaemia and spent a lot of time not knowing what day it was as they filled me with nuclear medicine, the money just swilled around in the accounts and I didn't pay it much attention.  I'm sure in a 100 years from now we will look back and say.... "they nuked poorly people .... really???"

Back to the present I was going to put some of the returned R/S money in zopa and was poking around the new look web pages to find I no longer have a safety net and the monthly default levels really jumped out at me. thx for your reassurances and through explanations.

I wonder what I shall do with the other R/S money, it certainly wont do much sitting in the Halifax that's for sure! 

Chill!

not sold or withdrawn in the last year and my recent 20/21 tax statement shows an expected 4%ish return. Remember if you are selling that eventually you will have a 100% default portfolio. The only way to achieve the c4% return is to keep the faith and reinvest interest.

the alternatives I’m in are Assetzcapital  and loanpad. Both of which have consistently returned about 4% during this crisis and well above the Halifax rate!!!

Defaults will be up for a few months as Covid payment freezes largely ended October/November, then add a few months for Zopa to try to get them back on track with no success before defaulting them.  What I am carefully looking out for is Defaults of post lockdown loans ie those granted form last March onwards.  Losses on pre Covid loans are more or less baked in now, and no doubt quite a bit higher than originally expected. Of the 31 defaults I have had this year on my mature portfolio, 19 have been 'Covid' affected, and 29 were originated before March last year.

All this doom mongering.

It won’t be worse than the 2008 recession and I sailed through that making interest with Zopa. Whereas my shares plunged 30% and there were several worries about bank accounts, building societies and Nordic savings accounts until govt bail outs.

to put it another way Zopa fared better than most financial institutions in that recession. I made about 7%pa with Zopa with bs interest at 5%. I’m now making 4% on Zopa with bs interest at about 0.5%pa. Seems fair.

Yes indeed but it took several years. Whereas I clocked up a decent 6 or 7% a year with Zopa. And with FTSE100 if you’d spent your dividends your capital would just be breakeven after 22 years. Timing matters a lot in shares.