Managing risk and the Provision Fund

How we manage risk to help protect your investment returns

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RateSetter’s investment model has ensured every one of our investors has received 100% of their principal and interest payments as due.


Provision Fund buffer*


Current estimate of bad debt**


Provision Fund coverage ratio


Principal and interest returned


We do the heavy lifting to protect your investment

We only lend to creditworthy borrowers

Every borrower must pass our comprehensive credit screening processes when applying for a personal loan, car loan or renewable energy loan. Our in-house credit team uses a combination of innovative technologies and traditional resources (such as credit bureau information) to assess each borrower’s credit risk.

We handle the credit analysis so you can be confident that your funds are being matched to creditworthy borrowers.

Your investment is backed by the Provision Fund

While we only match investor funds with loans to creditworthy borrowers, we appreciate that in some circumstances borrowers may be unable to repay their loans. That’s why we set up the Provision Fund, a pool of funds held in cash by a separate trustee, designed to protect investors in the event a borrower misses a payment or defaults.


The Provision Fund is designed to reduce the risks of peer-to-peer lending

The Provision Fund has ensured that no investor has ever lost a cent of principal or interest.*

All borrowers pay an amount into the Provision Fund

This amount is determined by the borrower’s risk profile, the loan amount and the loan term. A greater risk requires a higher contribution.

The Provision Fund can reimburse investors to protect against loss.

RateSetter may make a claim on behalf of the investor where a loss is incurred due to a borrower late payment or default.


When does the Provision Fund protect investors returns?

The Provision Fund will ordinarily protect investors from any loss when the interest coverage ratio is greater than 100%.


Provision Fund coverage ratio

The Provision Fund holds cash and also receives regular inflows from some existing borrower loans. In determining the Provision Fund coverage ratio, we measure the Provision Fund buffer against expected future losses on loans outstanding. When the coverage ratio is above 100%, we expect the Provision Fund to cover all borrower late payments and defaults.

Note: Data as at 16 March 2020. See below for definitions of key terms


How much protection does the Provision Fund offer?

The Provision Fund has an unblemished record for protecting investors against borrower late payments or defaults. We expect it to maintain this track record provided that future losses on outstanding loans remain below 6.0% of current loans outstanding.

The above illustration is indicative only and assumes no new lending. The net loss rate on all lending since inception does not reflect a fully seasoned loan book. Though we believe the Provision Fund provides meaningful protection for investors, it is important to remember it is not a guarantee nor an insurance product, and your capital is at risk. Read our Product Disclosure Statement for more information.

*The Provision Fund buffer is the sum of money held in the Provision Fund and the expected Provision Fund future inflows from outstanding loans due over the lifetime of loans, adjusted to reflect expected early repayments, payment holidays and bad debt. Whilst we’re extremely proud of the Provision Fund’s 100% track record, it is not a guarantee of future performance. Capital is at risk. Read the Product Disclosure Statement for more information.

All figures stated represent the RateSetter Lending Platform only unless stated otherwise.

Warning: Past performance is not a reliable indicator of future performance. Different investments reflect substantially different risk profiles.