Risks

We take the risks of peer-to-peer lending seriously, and work tirelessly to help ensure any risks are effectively mitigated.

Summary of key investment risks

Investing in the RateSetter Lending Platform is not without risk. Below we summarise the key investment risks. You should refer to our Product Disclosure Statement for a more detailed description of the key investment risks, as well as a description of other significant fund-specific risks, other significant lending-specific risks, other significant business lending-specific risks and other significant general risks.

Borrower late payment or default

A borrower or series of borrowers to whom your funds are lent may delay or stop payment on a loan or default on a loan. In such circumstances you may be protected by RateSetter making a claim to the Provision Fund, however, there is no guarantee or warranty as to any protection from the Provision Fund, and as such you may suffer financial loss.

No Provision Fund protection

We may make a claim to the Provision Fund to compensate you in the event of a borrower late payment or default. However, the Provision Fund is not an insurance product and we cannot guarantee nor warrant that you will be compensated in the event of a financial loss.

If you are not compensated by the Provision Fund, you may benefit from a number of debt collection or recovery processes that RateSetter may undertake. If a loan is secured, these processes may include the relevant security interest being exercised and the secured asset being repossessed or sold.

Assignment of your loan

If a borrower to whom your funds are matched defaults on a loan and you are not fully compensated by the Provision Fund or recovery efforts, RateSetter may assign that defaulted loan to a third party, such as a collections agency, for an amount it is able to negotiate, or the Provision Fund for $1. Once a loan has been assigned, you may not benefit from any recoveries that may then be made from that borrower.

No withdrawal of funds until end of lending market indicative term

You are only able to withdraw (or reinvest) your funds at the end of the indicative term of the lending market in which they are invested, except where i) they are repaid to you through scheduled repayment, ii) they are repaid to you by the borrower as a result of the borrower making an additional payment or repaying their loan early, or iii) if you are compensated by the Provision Fund.

Investment longer than indicative term

In the 1 Month and 1 Year lending markets, your funds may need to remain on loan to a borrower beyond the indicative term. This may occur if, at the end of the indicative term, there are insufficient lender funds available to replace your funds in a loan. This period could be as long as an additional twenty three months for the 1 Month lending market, and one year for the 1 Year lending market depending on whether your investment in the relevant loan is able to be replaced with the funds of a different investor.

If your funds are committed for a longer period than anticipated you should continue to receive borrower payments and the interest rate should remain the same.

Borrower default impact on availability of funds

In the event of a borrower late payment or default where you have not benefited from Provision Fund protection, you may only be able to withdraw your funds relating to that loan when any collections or recoveries have been made against that loan.

Differences in borrower creditworthiness

Your investment may be impacted by differences in the creditworthiness of borrowers to whom your funds are matched in circumstances where lenders are not fully compensated by the Provision Fund in the event of borrower late payment or default. RateSetter performs comprehensive borrower risk assessment and lends only to creditworthy Australian borrowers, however, there may be differences between the creditworthiness of borrowers to whom your funds are matched.

Differences in credit risks associated with loans to individuals versus loans to businesses

There may be differences in the credit risks associated with loans to individuals versus loans to businesses. Loans to businesses may be riskier than loans to individuals on an economy wide basis, however, there can be no certainty as to the relative riskiness of the loans RateSetter facilitates to individuals versus those loans RateSetter facilitates to businesses.

Variances in borrower creditworthiness over time

We assess a borrower’s creditworthiness at the date of loan application, and our assessment reflects their creditworthiness at that point in time. We do not commit to evaluating a borrower’s creditworthiness on an ongoing basis, although we may do so periodically. Your investment may be impacted should the creditworthiness of that borrower change over time.

Value of secured property insufficient to cover defaulted loan

In circumstances where your funds are matched to a secured loan and where lenders funding that loan are not fully compensated by the Provision Fund in the event of a default, your investment may be impacted by the realisable value of the property over which a security interest is held, to the extent that the realisable value is not sufficient to cover the full repayment of the loan. In other words, if a loan is secured, its repayment is not guaranteed.

Ancillary arrangement default

Where there is an ancillary arrangement in relation to a loan to which your funds are matched, a party making payments pursuant to that ancillary arrangement may stop making payments or default on their obligations. In such circumstances, you may be protected by RateSetter making a claim to the Provision Fund, however, there is no guarantee nor warranty as to any protection from the Provision Fund.

No deposit guarantee

Your investment is not a deposit and does not have the benefit of depositor protection laws as it would have if it were an amount deposited with an Australian ADI.



Other risk factors may exist in addition to those identified above and in our Product Disclosure Statement which should also be considered in light of your personal circumstances. If you have any queries or uncertainties relating to an investment in the RateSetter Lending Platform, please consult your adviser before deciding to invest. 

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