Zagga’s Peer To Peer Lending Showing Strong Returns
With more than 1,000 investors earning average interest rates of 8% per annum, Zagga's unique peer to peer lending model offers strong returns with real security.
While other providers are making changes to their models, Zagga has been the quiet achiever in the peer to peer market since it began in 2015.
Director and CEO Marcus Morrison says more than 800 retail investors in New Zealand and over 200 in Australia have invested through Zagga, funding about 150 loans all up worth more than $33 million in New Zealand and $240 million in Australia. The average return in New Zealand has been 7.96%, with the highest being 18% on a loan taken out to fund litigation.
"In the gap between bank deposits and sharemarket returns, there are limited viable options for retail investors outside of property and peer-to-peer lending. As a result, we are seeing strong and ongoing demand at Zagga, with many repeat customers," says Morrison.
Zagga loans have been mainly for residential property purchase or refinancing, commercial property, bridging loans and business finance.
However, the company recently launched an invoice-finance offering which was rapidly and fully funded by retail investors, with another new fund to be announced soon.
And, in an innovative move, it also recently funded a personal loan for the purposes of litigation funding. "This sort of loan pays a high rate to investors due to the borrower's security being in dispute through the litigation. The first one returns 18% per annum on a total loan of $663,880, and this is a category we are looking to expand," says Morrison.
"The level of security offered at Zagga is a key point of difference for us from other peer to peer lenders. We're unique in that we offer our investors genuine security in the way of first right of mortgage over the borrower's property, the same as banks do with their lending.
"The value of that property as security determines the LVR of the loan, and coupled with a rigorous assessment of the borrower, determines a corresponding risk grade and interest rate. In the worst case, Zagga would call on that property to be sold to repay investors."
Morrison says, to date, Zagga has only had three loan defaults in New Zealand with zero capital lost for investors to date. "We believe this is the most viable form of security for peer-to-peer lending, as it provides better cover than other forms of security and clearly much better cover than offering no tangible security at all."