P2P Money Blog

As RateSetter celebrates its 6th birthday this month we take a look at the company over the last years.  RateSetter was by our reakoning the 8th peer-to-peer company to launch in the UK, following Zopa and Funding Circle, and has one of the most recognisable brands within the industry.  RateSetter pioneered the provision fund which a larger number of P2P companies have subsequently adopted, including Zopa.  RateSetter, along with Zopa and Funding Circle form part of the original "big 3" P2P companies, and was a founding member of the P2P Finance Association.

The provision fund that RateSetter pioneered was revolutionary.  The fund would step in and repay the lender if - for any reason - the borrower did not repay.  The fund also addressed the issue at the time where lenders could not offset bad debts against interest.  The provision fund is not a guarantee and peer-to-peer lending falls outside of the Financial Services Compensation Scheme (FSCS).  However, to date lenders have not lost any money lending through RateSetter.  The provision fund is funded by a difference in the borrowing and lending rates.  Currently the provision fund is valued at over £16million with a future income of £6million, and expected future claims of £17million.  Bad debts are currently predicted to be less than 2.7% over the lifetime of a loan, which is an increase on the original estimate of less than 1.4% back in 2010.

RateSetter, to their credit, are also one of the few peer-to-peer companies that have maintained their lending model throughout their lifetime.  This provides comparative data over a relatively long period of time.