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Early Access Transfer
Will the early access transfer facility always be available?
No. Early access transfers are available at RateSetter’s discretion and may cease to be available to lenders at any time. An early access transfer request may not be fulfilled if:
- There are insufficient funds available from other lenders to replace your interests
- After fulfilling the request, the value of the remaining lending orders is less than $500,000 in the 5 Year Income lending market or $300,000 in the 3 Year Income lending market (this is known as the early access lending market value limit)
- Replacement lenders will be matched to replace your investment at a rate above 10% p.a. In the 5 Year Income lending market or 8.5% in the 3 Year Income lending market (this is known as the early access lending market rate limit)
- Your outstanding principal in a loan contract is less than $10.00
If your early access request is accepted, it may take up to four hours to fulfill. Your early access transfer request may be cancelled if the capital adjustment required to fulfil your request is higher than quoted.
What is the Early Access Facilitating Partner?
The Early Access Facilitating Partner is the entity to which an outgoing investor’s loans are transferred following a fulfilled early access transfer. The Early Access Facilitating Partner ‘pays’ the outgoing investors for that transfer using funds lent to it by the replacement investor. This creates two back-to-back loans, with the Early Access Facilitating Partner in the middle.
What is an early access transfer?
If an investor has funded a loan or loans in the 3 Year Income or 5 Year Income lending markets, they may be able to use the early access transfer feature to withdraw part or all of their investments before the end of their indicative term. The availability of the early access transfer feature is at our discretion and may not always be available to you.
For information about when the early access transfer facility is available, see section 7 of our Product Disclosure Statement.
What happens if the rate that applies to an outgoing lenders loan is different to the rates being offered by replacement funders? (i.e. What is the capital discount?)
The interest rate that applies to a loan withdrawn via an early access transfer may differ from the interest rate associated with the loan that replaces it. Consequently, the outgoing lender may receive less than the current face value of their loan.
For example, if the interest rate of a replacement funder’s lending order is greater than the interest rate on the relevant early access loan, we will discount the early access loan. This ensures that the economic return expected by the replacement funder (given the rate specified in their lending order) is met, and also means that payments under the early access loan remain the same.
For example, say an individual loaned $1,000 in the 3 Year Income market at a rate of 8% per annum. If, when they seek to withdraw their loan using an early access transfer, the prevailing interest rate in the market has increased to 10% per annum, we will use the capital discount to ensure that the lender who replaces them (at 8% p.a.) receives an economic return equivalent to 10% per annum. In other words, we would discount the value of the outgoing lender’s loan to ensure a fair return for their replacement.
Where an outgoing lender receives less than the face value of their loan following an early access transfer, they may be able to recognise the reduction in value of their loan interests as a tax or capital loss.
What fees are payable?
In relation to the early access transfer feature, outgoing lenders may pay a fixed fee of up to 1.5% of the amount paid to them by the early access facilitating partner (i.e. net of capital discount).
How do I request an early access transfer?
Early access transfers are requested from within an investor’s RateSetter account when the feature is available. To request an early access transfer:
1. Click ‘Early Access Transfer’ on the left hand menu of your lender RateSetter Account.
2. Select the lending market out of which you’d like to transfer a loan (three- or five-year market).
3. Specify the amount that you wish to early access transfer. This amount excludes capital reduction and fees.
4. Click ‘Get Quote’
5. Confirm details of the early access transfer, including any applicable fees and any capital discount. Then click ‘Proceed’ to be placed in market for matching with prospective replacement funders.
Note that when you request an early access transfer funds will be returned to your holding account, not withdrawn to your nominated account.
Does this mean that as an investor in the 3 or 5 year lending markets I can be matched to new loans or replacing another investor in their loans?
Yes. Investors will not know if they are funding a new borrower loan, or replacing an outgoing lender via a loan to the early access facilitating partner.
Can I choose which loans I exit?
No, lenders specify an amount (before fees and any capital discount) that they wish to acquire using an early access transfer. RateSetter then selects loans (or parts of loans) to fill this amount, starting with the loan that has the longest remaining term.