RateSetter

RateSetter 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 providers.

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.

Competition

RateSetter currently has 13% of the peer-to-peer market, and this market share is increasing.  The main company in this arena is Zopa.  RateSetter is also competing with high street banks, building societies and personal loan companies.

Comments

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.

General	Communication		7/10
	Ease of Web Site		8/10
	Innovation		8/10
Lending	Lending Rates		8/10
	Access to Funds		6/10
	Fees		7/10
	Bad Debt		10/10
Borrowing	Loan Rates		7/10
	Speed of Loan		9/10
	Fees		5/10
Overall			7.5/10

For an in-depth analysis and comparable statistics please refer to the comparisons of the peer-to-peer companies.

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%)

RateSetter review written by Ian Gurney, last updated on 1^st February 2013