7 reasons why RateSetter is better

RateSetter is Australia’s leading peer-to-peer lender, connecting investors who want an attractive return with creditworthy individuals who want a competitive loan. Find out what makes uniquely positions us to do so.

Hands up if you have been reading about various new Australian peer-to-peer lenders? We have, and it’s an exciting development: we foresee a vibrant future for peer-to-peer lending in Australia, helping to bring much-needed competition to various loan markets.

We also appreciate that Australians will soon have a choice as to which peer-to-peer lending platforms they invest in, so we thought it might help if we highlight what makes RateSetter different, from an investor’s perspective.

1. Regulation and investor protection

Let’s get the least exciting, although we think most important, bit out of the way first. Not all peer-to-peer lenders are regulated equally, and investors should be aware of the differences.

RateSetter is the first and only company in Australia to have been granted an Australian financial services licence (AFSL) that is specific to peer-to-peer lending. This also means that RateSetter is the first and only company in Australia licensed to accept funds from retail investors and so isn’t restricted to only accepting funds from a special class of wealthy investors who qualify as a ‘wholesale or sophisticated investor’. This is something we are very proud of, and something we think makes us, at least on some measures, the only true ‘peer-to-peer’ lender in Australia.

We think that being open to all investors is core to the very concept of peer-to-peer lending. Our goal is to help democratise finance and shift power away from large traditional institutions and back to the consumer, and you just can’t do that if you’re only open to millionaires.

We worked for over two years to gain our AFSL so we could offer our services to all Australians from day one. This process included educating ASIC about peer-to-peer lending and working with them to fine-tune our product offering and compliance processes. We worked for nearly a year on our Product Disclosure Statement (PDS) to ensure that it provided a full description of how RateSetter Lending Platform works and the key benefits and risks of investing. We are the only Australian peer-to-peer lender that has a PDS.

The RateSetter Lending Platform is the only registered peer-to-peer scheme in Australia, and unlike other peer-to-peer lending platforms, is subject to a comprehensive regime of ongoing compliance requirements including five annual audits, oversight by an independent compliance committee and frequent public reporting requirements.

This stringent compliance regime underscores the fact that retail platforms are subject to far greater regulation and related consumer protections than peer-to-peer lending platforms that are only licensed to accept wholesale and sophisticated investors.

2. Our unique Provision Fund

Funny name but a seriously good idea. Put simply, our Provision Fund is a pool of cash funded by borrowers and held in trust for the benefit of investors in the RateSetter Lending Platform. If a borrower defaults then the Provision Fund may compensate the lenders with funds matched to that loan.

The RateSetter group invented the concept of a Provision Fund in the United Kingdom in 2010, and we believe this innovation has helped to make peer-to-peer lending simpler and safer. In Australia, we are the only peer-to-peer lender with a Provision Fund.

In the United Kingdom, the Provision Fund has worked exactly as planned, with every lender receiving every penny of principal and interest due to them since the RateSetter group’s establishment in 2010. In Australia, we haven’t been operating for so long, but this track record remains intact. Our number one priority is to ensure that we continue to help protect lenders from borrower late payments and defaults to maintain this track record.

3. Unrivalled simplicity

Lending with RateSetter is simple and flexible. Investors can start investing with just $10, and for indicative terms of one month to five years. No other peer-to-peer lender provides such flexibility with respect to minimum investment or term.

With RateSetter, you don’t need to choose credit grades, critique each borrower before investing, or calculate expected returns after defaults. We do all that hard work for you. You only need to choose which lending market you which to invest in (ie the indicative term), the amount you wish to invest and the rate.

We also make it easy to manage your investment, with features such as automatic reinvestment, simple funds transfer processes and a user-friendly website. We provide clear and easy to understand summaries of your investments and provide you with your tax statements at the end of each tax year. We really want to make peer-to-peer lending as simple for you as humanly possible.

In addition, we also allow you to invest personally, via a company or using your SMSF.

4. Track record

The fact that we are part of the largest and most successful peer-to peer-lending group in the United Kingdom and Europe by monthly volumes, we think, makes a big difference. The RateSetter group was founded in the United Kingdom in 2009, and since its launch has grown to be one of the largest peer-to-peer lenders globally. The RateSetter group has facilitated more than 70,000 loans and has matched funds between borrowers and lenders over one million times.

We’ll forge our own path in Australia, led by our local management team and local investors, who together own the majority our local operations. However, it’s always helpful to know we have a model that consumers have gravitated to before, and that we have colleagues to talk to who’ve already been around the block.

5. Transparency

We believe transparency is a core tenet of peer-to-peer lending. That is why RateSetter is by some margin the most transparent peer-to-peer lender in Australia.

You can easily review our performance to date by registering on our website. We tell you how successful (or not) we are, warts and all. We show you how many loans we’ve written, how much money is on our platform, what the default rate is on loans, the history of rates in our markets, the size of our Provision Fund and much more.

We tell you this because we think, as an investor, you have a right to know, that it helps you to better measure the risks of lending and that the more you know the more you will trust us. We don’t filter out the embarrassing bits or highlight the good bits. It’s all there on our website for you to see.

6. Underwriting standards

Australians are beneficiaries of robust privacy laws and this means that we can’t really tell lenders much about individual borrowers who have applied for a loan on our platform. Instead, RateSetter does the hard work of assessing borrower applications for our investors. Amongst other things, we check each applicant’s credit history, their financial situation, whether they can afford the loan they have applied for, and score them accordingly. We then make an assessment about whether they should be lent your money.

We use pretty much the same technology that the banks do, and then some. In fact, we think we have better technology and decision making than traditional lenders. We only lend to creditworthy borrowers and we can do this because we offer personal loans at lower rates (no traditional middleman, no retail branches, no huge executive bonuses to pay – a subject for another day).

7. Lenders set the rate

On the RateSetter platform lenders choose the rate at which they want to lend. It’s a true market where rates move according to lender and borrower demand. This is the only real-time peer-to-peer lending market of its type in Australia. You can see the rates at which other people are lending and you can decide if you want to bid a lower rate. Obviously the lower you bid the quicker your funds will be matched to a borrower loan. But that’s up to you.

These are some of the things that make RateSetter different. We are not saying this makes us the best – we’ll let you decide that for yourself.

Important notice: This post is accurate as 2 March 2015. The Provision Fund is not a guarantee or an insurance product. Lending on RateSetter is not without risk. See the risks section of the RateSetter website and our Product Disclosure Statement for further details. The information in this post should not be taken as financial product advice and has been prepared as general information only without consideration for your particular investment objectives, financial circumstances or particular needs. You should read the RateSetter Lending Platform Product Disclosure Statement before making any decision about your investment choices.

This information does not constitute financial advice and you should consider whether it is appropriate to your circumstances before you act in reliance on it. Any opinions, forecasts or recommendations reflect the judgement and assumptions of RateSetter as at the date of publication and may later change without notice.