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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.
Why is my rate of return less than the rate at which I invested?
Our displayed rates of return may assume that a lender is reinvesting their borrower payments into the same lending market at the same rate. If your actual rate of return is less, this may be because of processing times, because you have not reinvested your repayments, or because you have reinvested them at a lower rate than the original rate of your order.
Why did I receive my loan repayment before the indicative loan term?
For borrowers, one of the attractive benefits of taking out a loan on the RateSetter platform is the ability to repay their loan early without facing any early exit fees or charges. This does mean that the lender may occasionally be repaid early. Lenders can use reinvestment settings to ensure their funds are automatically reinvested back into a lending market of their choice if this happens.
Who am I lending to?
We facilitate lending to creditworthy Australian-resident individuals and creditworthy Australian-resident businesses, although the majority of our lending is to individuals rather than to businesses. Our average borrower earns an income of $84,000 and is 40 years old. Borrowers are typically seeking loans for purposes such as consolidating debts, purchasing a car or renovating their home. In our National Clean Energy lending market, borrowers are seeking funds for the purchase and installation of clean energy equipment, such as solar panels and batteries.
At RateSetter, we do the work for you. We carefully examine an applicant’s credit file and circumstances to understand their financial position and ability to repay the loan. Our standards mean that we are not able to assist a large majority of borrowers that submit an enquiry.
RateSetter provides a confidential lending service. The only details you are provided about a loan to whom your funds are matched to is a reference number. All identity, credit, affordability and suitability checking is performed by RateSetter, and is not displayed on our website. However, RateSetter publishes a full loan book that sets out details (including loan amounts, interest rates and purposes) on every loan funded to help you understand more about the profile and performance of our loans.
For more information, you shouldsee the Product Disclosure Statement.
Where is money held before it is on loan?
Funds in your holding account and funds on market waiting to be matched with borrowers are held in cash. These funds are held on trust in an account with an Australian Authorised Deposit-taking Institution, in the name of RateSetter’s appointed custodian.
The custodian also acts as the legal lender of record in relation to loans made to borrowers.
What is the Provision Fund? How does it work?
The Provision Fund is designed to help provide investors with ongoing protection against borrower late payments or loan defaults. It is not a guarantee or an insurance product.
RateSetter in the United Kingdom was the world’s first peer-to-peer platform to introduce a Provision Fund to help protect lenders from financial loss in the event of a late borrower payment or default. This innovation represented a significant evolution in peer-to-peer lending, helping to make it simpler and safer for investors.
The money in the Provision Fund comes from charges paid by borrowers. When a borrower applies for a loan, they may be required to pay a charge (the Risk Assurance Rate or Risk Assurance Charge), the amount of which is determined by a number of factors, such as their credit rating from independent credit bureaus. Borrowers pay the the Risk Assurance Rate or Risk Assurance Charge into the Provision Fund.
Although the Provision Fund is funded by borrowers, it has been established for the benefit of lenders. RateSetter may, at its discretion, instruct the Provision Fund’s trustee to pay an amount out of the Provision Fund to compensate lenders for a loss arising from a borrower default. Importantly, funds held in the Provision Fund are held for the benefit of investors. RateSetter cannot use these funds for its own purposes. The Provision Fund can only be used to compensate investors for losses of principal and/or interest.
For further information about the Provision Fund, see the Product Disclosure Statement.
What is the minimum investment?
The minimum investment to become a peer-to-peer lender is $10. Although there is currently no maximum investment, RateSetter Australia reserves the right to cap the amount of your total investment. In addition, RateSetter reserves the right to refuse to submit your order to a lending market or to cancel your order without giving you prior notice.
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 is a holding account?
The Holding Account contains deposits made into your RateSetter account as well as capital and interest repayments on existing loans. You can withdraw these funds from your account immediately or place them on market to be matched against borrower loans.
Funds in your Holding Account are held as cash on trust in an account with an Australian Authorised Deposit-taking Institution, in the name of RateSetter’s appointed custodian. You do not earn any interest while your funds are in your holding account.
The custodian also acts as the legal lender of record in relation to loans made to borrowers.
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 happens if an investor passes away?
In the unfortunate event that a RateSetter account holder passes away, we can transfer control of the account to the executor of their estate. To complete this transfer, and depending on the type of lending account, we will usually require a copy of the death certificate and a copy of probate.
If the executor wishes, we can stop reinvestments and set up an auto-withdrawal so that funds are transferred back to a nominated bank account. Alternatively, the executor can take over the lending account if they would like to continue lending with RateSetter.