Marketplace lending is still a relatively underutilised borrowing and investing alternative in Australia. We have put together these FAQS to help you better understand the arrangement.
Should our FAQs not cover your specific query or information requirement, please contact us at email@example.com with your query, and we shall endeavour to respond with the information you require.
What is marketplace lending?
Marketplace lending, or sometimes also referred to as peer-to-peer lending, is a lending arrangement that enables investors (funders) to fund borrowers via an online platform (the marketplace) without the involvement of traditional financial institutions like banks.
The entire process is quick, easy, transparent and convenient.
How is Zagga's marketplace lending different from a bank loan?
Marketplace lenders are not banks or finance companies and we don't lend or borrow money ourselves – we simply provide a flexible alternative for borrowers and investors to get a better deal. In other words, we match approved borrowers with committed investors ready to fund.
Unlike borrowing and investing through traditional channels, we provide a platform to match creditworthy borrowers with savvy investors. Investors have complete control over the types of loans they are prepared to fund, and can earn attractive returns. Borrowers benefit from a convenient, transparent and speedy application process, with easily understood rates.
Why is marketplace lending now available in Australia?
Peer to peer lending is well established overseas and growing at phenomenal rates in the US, Europe and the UK. Marketplace lending is still relatively new in Australia but is already gaining momentum and popularity as it can offer borrowers a much more flexible, and sometimes more cost-effective, alternative to traditional financial intermediaries. Investors can also receive an attractive return and retain choice and control over the level of risk they are exposed to.
Is marketplace lending regulated and by whom?
Marketplace lending is regulated and scrutinised in the same strict standards as traditional lenders. This is done by the Australian Securities and Investments Commission (ASIC) who are also responsible for issuing licenses and monitoring the conduct of licensees.
Zagga is fully registered and holds both an Australian Credit License (ACL) (in Zagga Market Pty Limited) as well as an Australian Financial Services License (AFSL) (in Zagga Investments Pty Limited). Additionally, as a credit licensee, Zagga fully complies by the requirements of the National Credit Code and responsible lending requirements.
What are the risks associated with investing through a marketplace?
All investments carry some degree of risk, and generally higher rates of return are associated with higher risk of loss of capital invested or investment returns. Please refer to FAQs – Invest / What are the risks?
What is the difference between secured and unsecured lending?
A secured loan is secured by an asset belonging to the borrower - typically a mortgage over property - to decrease the risk assumed by the lender. Because we secure all approved loans with a registered mortgage over real property (and may, at our complete discretion, request additional security), we can lend larger amounts for a greater range of purposes, as the credit risk to a prospective investor is mitigated.
An unsecured loan does not have any assets to act as security against the loan in the event the borrower defaults on the repayments. Because of this, the interest rate charged is generally higher than a secured loan, as lenders take a greater risk. Consequently, investors may prefer to invest in unsecured loans for lower amounts.
How does the Zagga process work?
Zagga has a unique algorithm that can quickly and efficiently match a borrower's loan and credit profile to the risk and investment profile of an investor.
Once an investor has joined Zagga, registered and completed their investment risk profile and investment objectives, their details will be stored in the marketplace. The investor will be alerted when there is a loan/borrower that matches their specified investment criteria. The investor will have the opportunity to view relevant loan details and decide whether to accept the loan or not before committing to proceeding with the investment.
If the investor agrees to participate in the funding of the loan, their share of the loan, subject to a minimum investment of $100,000, will be transferred into the Zagga Investments Lending Trust bank account. Once all legal documentation is signed and a mortgage taken over the security property, the funds will be made available to the borrower. This can all happen in as little as three business days!
From there, Zagga manages the loan - collecting repayments from borrowers, issuing investors with their regular investment returns, and dealing with any defaults or collection issues.
All loans are written in the name of Zagga Investments Pty Limited as trustee for Zagga Investments Lending Trust. This Trust is separate from Zagga and specifically established to issue loans, hold securities and disburse funds, on behalf of the investors.
Does Zagga have any physical branches?
We have an office in Sydney but do not have any branches as we are primarily an online business.
How does Zagga make its money?
We charge borrowers a Platform Fee. This is between 1 - 3.5% of the loan amount depending on our Credit Assessment Score which is derived using the borrower's credit history, loan amount and value of the security property.
We charge investors an ongoing monthly Loan Management Fee which is between 0.5 ;- 1.95% of their fractional share of the annual outstanding loan balance.
Can I be a borrower and an investor?
Yes, you can! Simply join our marketplace, then complete the registration for both a borrower and investor. However, you cannot invest in a loan in which you are a borrower, guarantor or mortgagor.
Note that to be accepted as a registered investor, we must be satisfied that you meet the wholesale investor criteria as defined under the Corporations Act 2001 (Cth). You can find out more about wholesale investors by visiting the ASIC website and by contacting us on 1300 192 442 to confirm our requirements. We are open 9am to 5pm Monday to Friday (Sydney time) except public holidays. Or if you prefer, email us anytime.
How do I register with Zagga?
Once you’ve joined our marketplace, simply follow the links to register as either an investor or a borrower.
Please note that before you can transact, we must be able to verify your identity to comply with the AML/CTF Act. For your convenience, please refer to the AML/CTF Checklist for a list of documents that we require for this purpose.
Where do the loan repayments go?
Borrowers' loan repayments are deposited into the Zagga Investments Lending Trust bank account held with St George Bank. The loan management fee, payable by the investors, will be deducted and paid to Zagga, and the balance will be forwarded to the investors as their return.
Do borrowers know who is funding their loan?
No, the names and details of investors will not be disclosed to borrowers.
Do investors know to whom they are providing funding?
We only share relevant loan information to registered investors to whom we have matched a loan. The borrowers' names are only provided to investors with the borrower's prior consent. The borrowers' personal details such as residential address, telephone numbers, email address and place of work, are never released to investors.
Contact details or any information that can identify borrowers or investors must not be asked for or exchanged. Parties must not attempt to contact each other or transact outside the marketplace.
Can I talk to a real person?
Yes, when you ring us during business hours you will always speak to a real person. Call us directly on 1300 192 442. We are open Monday to Friday between 9am to 5pm (Sydney time) except public holidays.
How secure is my information?
Our 256-bit encrypted, secure document portal allows a matched investor to log in using only their assigned password, to view the borrower's loan information and supporting documentation, which is redacted to protect the borrower’s privacy.
Registered investors are bound by non-disclosure provisions, to not disclose any information about borrowers and their loans. Zagga takes this requirement very seriously and will act against any investor who breaches this. Activity on the portal is tracked and audit-trailed.
Furthermore, our robust systems have been rigorously tested to prevent unauthorised access or inappropriate use of confidential information. They are constantly monitored and managed by external computer security specialists. We continually update our security settings and have them tested by independent third parties for industry standard compliance.
Whenever personal information is sent from our website it is protected by the high security levels which are standard practice in internet banking and large scale e-commerce sites and involves the use of a 256-bit encryption string. Encryption protects your information when it is transmitted by converting the information into an unreadable code using a ‘key' and decoding it using the same key. The longer the key the more difficult it is for hackers to break the encrypted code.
How do I lodge a complaint?
Your satisfaction is of utmost importance to us so if you have a complaint about any part of our service, we would like to talk to you so we can try to fix the problem. There are a few ways you can lodge your complaint:
- send us an email
- call us on 1300 192 442 from Australia, or +61 2 9290 8543 from overseas (9am to 5pm Monday to Friday, Sydney time, except public holidays)
- write to the Complaints Officer at GPO Box 4505, Sydney NSW 2001.
If you are a Borrower and we are unable to agree on how to resolve your issue, you can contact the Australian Financial Complaints Authority (AFCA), the dispute resolution scheme for financial service, using one of the following contact channels:
- send an email to firstname.lastname@example.org
- call on 1800 931 678
- write to Australian Financial Complaints Authority at GPO Box 3, Melbourne VIC 3001
- or visit their website at afca.org.au.
You can quote Zagga Market's AFCA membership number - 38810.