RateSetter

RateSetter is managed by an experienced team with a FinTech focus. Daniel Foggo, CEO, won Fintech leader of the year in 2016. The platform was established in the UK in 2009 making it a very early entrant into the marketplace lending industry. The concept was transplanted to Australia in 2014 and is operating under its own credit license number (449176).

Ratesetter offers both personal as well as small and medium enterprise loans. Investors can contribute towards multiple loans. Rates of interest are set by market forces. A lot of these loans are likely to be under secured (or possibly not secured on an asset at all, especially in the case of personal loans). This is something to be aware of. The platform may be more heavily exposed to adverse credit conditions during a macroeconomic downturn (more people are likely to default if unemployment increases, for example) than some other marketplace or peer to peer lenders operating in a different sector.

However, Ratesetter maintains a provisioning fund, out of which it compensates lenders in the case of late payment or default. The company makes no guarantee that all losses will be covered by this fund (in the event of a serious liquidity or economic event the fund may not be large enough). However as at early September 2016 the fund was capitalized at 183% of expected bad debt.

The platform has very low minimum investment criteria (from $10) and short terms where desired, however both these points are mitigated somewhat by the fine print (make sure you read all of it). Unlike many platforms, Ratesetter does charge investors fees. Lenders are charged 10% fee on gross interest earned and, unlike some other platforms, any interest earned from unattributed or holding funds is retained by Ratesetter.

Although terms are advertised “from 1 month”, it should be noted that the fine print indicates that in circumstances where other funds are not available, some short term loans may be rolled over into longer terms at the discretion of Ratesetter. That is, the liquidity you may think you have needs to be checked against the fine print. This is broadly similar to bond funds we’ve covered before (here and here) that will undertake to give investors access to their funds shortly after request but in adverse events have the power to hold those funds.

I gave Ratesetter a call to see how often this has occurred in their experience: their response was that they have never held an investor’s funds beyond the specified time without agreement, but have in some cases offered higher rates to reach an agreement to roll over the investment. As always, read the fine print and plan accordingly.

Investors should also be wary of appropriately diversifying their investment within the platform as well as within their portfolio as a whole: make sure you understand risk and return as mediated by the platform and not just in general terms.

Ratesetter offers an accessibility to this product class that many other platforms don’t. Although it has features that you should be fully aware of, if you want to explore this asset class, but don’t have a large amount of capital you feel is prudent to invest in this sector, Ratesetter offers options to invest at much lower levels of financial commitment.

Company Name: Ratesetter
Product Name: Personal and SME lending
Advertised Rates: 3.5-9.8%

Advertised Term: 1-60 months, note the fine print
Minimum Investment Conditions: From $10, retail investors welcome

Best Features: Well stocked provisioning fund, well established company.
Big Questions to Ask Note fees and the fine print around short term lending.
Security: There may be some security, but unlikely that all loans are fully secured.

Website: https://www.ratesetter.com.au
Phone Number: 1300 768 710