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Variable Rate Loans
The interest rates borrowers pay on variable rate loans are determined by a range of market conditions. The global COVID-19 pandemic has impacted the markets that fund some RateSetter loans, causing some of our borrowers to see changes to their loan. The below information may be helpful to understand your loan and any communication you receive regarding it.
What is a variable rate loan with RateSetter?
The interest rate for our variable rate loans can change or vary over the life of the loan. The interest rate that applies to your RateSetter loan is not set by RateSetter but is determined by the rates offered by everyday investors who funded your loan in our lending markets.
How is a variable rate loan with RateSetter different to a fixed rate loan?
A fixed rate loan has the same interest rate for the entire term of the loan, where as the interest rate for a variable rate loan may increase or decrease during the term of the loan If your interest rate changes, you will receive a notification – either in your monthly statement or a separate notice. Changes in your loan interest rate does not impact the amount of your ordinary monthly repayment, only your final repayment. When interest rates increase, this may increase your final payment, and when they decrease, reduce it.
Why has my rate changed since I’ve taken out my loan?
The rate that applies to your loan is set by the everyday investors who fund your loan in our lending markets. As a result of the unprecedented economic uncertainty caused by the COVID-19 pandemic, we have experienced greater than usual volatility in our lending market rates. We anticipate interest rates will stabilise over time.
What does a change in interest rate mean for my loan?
We understand it may be distressing to receive a notification about a change in your interest rate. However, it’s important to note that the change does not impact you in the immediate term or the amount of your next monthly repayment. Any changes in rate only impact the amount of your final repayment.
The RBA rate is at an all time low. Why has my interest rate not reduced to reflect that?
The RBA’s cash rate affects the cost of funding for banks. It is important to know that, unlike a bank, your RateSetter loan is funded by everyday investors who set the rates for the loans they fund. While the RBA cash rate may influence the rates set by those investors, there is no direct relationship between the cash rate and the rate on your RateSetter loan, and RateSetter is not able to pass on any cuts like a bank could.
Why is my interest rate different to the rates you are currently advertising?
There are some important factors to to consider when reviewing the rates displayed on our website:
- The rates displayed on the website are described as ‘starting from’, which means they could vary;
- The rates displayed on the website are calculated based on an individual with an excellent credit history; and
- All rates you are charged or quoted are personalised to your individual circumstances.
Our interest rates are determined by a number of different factors, these may include the loan term, your individual circumstances and the rates currently available on our lending markets.
Why has my rate changed multiple times within a month?
While your monthly repayments do not alter during the term of your loan, there may be different everyday investors that are funding your loan at various times. Where investors require a different rate of return to continue funding your loan, you will receive a notification of a rate change that is outside of your normal monthly statement. Importantly, any change you are notified about only applies until your next monthly repayment and does not impact the amount of that next repayment.