Data valid as of 21st January
* Due to the provision fund all
bad debt has been
covered by the provision
fund, and no lender has
was launched in 2010 and joined a rapidly expanding
P2P provider base. It has overtaken some of its
rivals to establish itself in the top three P2P
companies in the UK. RateSetter is also a
founder member of the P2P Finance Association.
RateSetter operates a market where borrowers
can take the market rate which are the lowest rates
available, or they can wait to see if their borrowing
request is fulfilled.
Lenders are charged 10% of interest paid rather
than a fixed fee which is perhaps more equitable
in the current economic climate. Borrowers
are charged a fixed fee on completion plus a credit
fee depending on their credit rating.
Unique selling point
One of the problems encountered with peer-to-peer
lending with current legislation is the inability
to offset bad debt against income, unless the lender
is operating as a business with a
consumer credit license.
This will reduce your
return as you
are effectively paying tax on bad debts. RateSetter
addresses this problem with a "provision fund"
for which each borrower makes a contribution when
the loan commences. The aim of the provision
fund is to recompense lenders if a borrower should
be unable to meet their commitments. This
approach is being copied some of the newer P2P providers.
RateSetter also allow lenders to set their headline
rate after the deduction of fees, removing one of
the complicating factors with other peer-to-peer
From the perspective of the borrower, RateSetter
is the only peer-to-peer provider to offer a rolling
monthly loan, which can be repaid at any time, or
converted to a fixed-term loan.
RateSetter currently has 13% of the peer-to-peer
market, and this market share is increasing.
The main company in this arena is
RateSetter is also competing with high street banks,
building societies and personal loan companies.
The web site
is professional and communication has been very
good. The lending rates are slightly higher
than other P2P companies but rates are falling
due to the popularity of RateSetter with lenders.
To date the provision fund has covered all missed
payments and as such no lender has experienced
a capital loss, which makes RateSetter stand
out from the other P2P providers. While
lenders cannot access their funds from the 3
year loans, the rolling term allows lenders
access to their funds the next month if required.
In summary RateSetter offers borrowers good rates,
and lenders an excellent return. The P2P money
website recommends RateSetter as the number one
provider for lending.
Bad debt warning - bad debt can take months
to years to materialise, and therefore the actual
bad debt figure may not be fully representative,
especially when a company's loan book is growing
at a significant rate (for example for the first
two years Zopa bad debt was 0.05%)
Ian Gurney, last updated on 1st February