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Earn 6–10 % pa (Current Market Rate) Lending Your Money for 1 Year @ RateSetter

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Earn 6–10 % pa (Current Market Rate) Lending Your Money for 1 Year @ RateSetter
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Scrooge McDuck on 07/04/2017 - 17:47 ratesetter.com.au (395 clicks)
Last edited 07/04/2017 - 18:24

Are you tired of the low interest rates offered by banks for your savings? Well if you can't beat 'em, join 'em!

RateSetter is a peer-to-peer lending platform which matches lenders with buyers on a market. The current rate for the 1 year lending market is 6.1 % pa after fees. That's twice what you can earn from a "high interest" savings account with a bank!

Of course, like any investment, the return comes not without risk. RateSetter is a multinational company founded in the UK in 2009. RateSetter features a provision fund which is financed by borrower fees and serves to provide a safety-net for lenders in case of borrower late payment or default. Thus far the provision fund has ensured that lenders have received every cent owed to them.

Compare this to a bank deposit. Bank deposits with Authorised Deposit-taking Institutions are guaranteed by the Australian Government up to $250,000. So you shouldn't lose your money unless your bank and the Australian Government fail.

With RateSetter you own an economic interest in a loan (or loans). To lose money, a large number of borrowers would have to default within a short period to exhaust the entire provision fund. Even then, RateSetter will undertake a number of debt recovery procedures to recover your funds.

Product Disclosure Statement

Referral Links

Referral: random (2)

$50 for referrer and $50 for referee after investing $1,000 in the 5-year income market.

Financial Investment Lending P2P Lending

Related Stores

Plenti (Previously RateSetter)
Plenti (Previously RateSetter)

closed Comments

  • neil on 07/04/2017 - 17:56

    That's the highest rate since January 2015. Avg. rate for 1 year is 5%.

    Something weird is going on, it's at 10% now looking at the live orders???

    • Scrooge McDuck on 07/04/2017 - 17:59

      That's the highest rate since January 2015. Avg. rate for 1 year is 5%.

      I can confirm the legitimacy of this deal as I just had a substantial loan matched at 6 % this afternoon.

      Something weird is going on, it's at 10% now looking at the live orders???

      Seems like a large loan has bought up a lot of the funds on offer. Wish I got in at 10 %! ><

      • neil on 07/04/2017 - 18:05

        Hit 10%, now everyone trying to price beat by .1%. Wonder how it jumped from 6 to 10% within a few hours?

        Live Market:

        Rate On Offer Orders Cumulative
        ≥ 15.0% $1.1k 1 $59.1k
        14.0% $1.0k 1 $58.0k
        10.0% $35.5k 3 $57.0k
        9.9% $7.4k 4 $21.4k
        9.8% $13.0k 2 $14.0k
        9.7% $1,000.00 1 $1,000.00

        EDIT: Now down to 8.8%.

        • Scrooge McDuck on 07/04/2017 - 18:08

          Wonder how it jumped from 6 to 10% within a few hours?

          There were a few tens of thousands of dollars being asked for, for a few hours this afternoon.

          Also, there was and still is a large amount offered at 10 %. So the large loan has bought up all the smaller offers and capped out at 10 %.

      • Cupid Stunt on 07/04/2017 - 19:14

        Wow, that is a massive jump! Usually hovering around 5%, so clearly someone has just been approved for a substantial loan and has hoovered up the funds. Forget about jumping on the bandwagon unless you have available funds, as it will be early AM tomorrow to get cleared funds across…

  • [Deactivated] on 07/04/2017 - 18:24
    -2

    risk your money for 6%? no thanks

    • Scrooge McDuck on 07/04/2017 - 18:25
      +2

      risk

      You need to quantify the risk. Every action in your life carries risk but many of them are justified.

      What if it's a minuscule risk?

    • wetsandwich on 07/04/2017 - 19:07
      +5

      There is a risk the AUD will collapse overnight, so even having any form of AUD is 'risk'.

    • Diji1 on 07/04/2017 - 21:16
      +2

      If you do nothing with it it sits there losing value all by itself.

      • klownz on 08/04/2017 - 23:33

        By the same logic, do something and you can lose it even quicker.

  • charlie123 on 07/04/2017 - 18:31
    +2

    There was some good discussion about this on reddit:

    https://www.reddit.com/r/AusFinance/comments/63kt7u/notes_fr…

    Edit: look if your investment is liquid or not.

    • Scrooge McDuck on 07/04/2017 - 18:37

      Why the negative vote?

      • charlie123 on 07/04/2017 - 18:41

        Because this is not a good investment option IMO. I'll update the post later when I am not on mobile

        • Scrooge McDuck on 07/04/2017 - 18:54
          +6

          Great! Neg first, reason later. 🙄

        • charlie123 on 07/04/2017 - 19:29
          +4

          @Scrooge McDuck:

          1. The income from this investment is not tax efficient.
          2. Illiquid investment. You are locked in for a certain period of time for it to be worthwhile.
          3. Provision fund is 4% of the total loans. This does not cover 100% of your investment, at least not everyone's investment.
          4. If you're looking for good returns, why not try Vanguard Index funds. Low cost of management and not fuss.

          Hope this helps.

        • Scrooge McDuck on 07/04/2017 - 20:18
          +3

          @charlie123:

          The income from this investment is not tax efficient.

          You're just paraphrasing the first reply of the reddit thread. The interest income from this is taxed no differently to the interest income from a savings account or term deposit; or income from other investments.

          Illiquid investment. You are locked in for a certain period of time for it to be worthwhile.

          No different to term deposits. With other investments, such as Index Funds as you suggested later, you have to pay a bid-offer spread and brokerage at minimum. Short-term volatility is another factor. Both of those cause an investor to be locked in for a certain period of time for it to be worthwhile.

          Provision fund is 4% of the total loans. This does not cover 100% of your investment, at least not everyone's investment.

          Actually it's 5.6 % of loans outstanding. It's also 172 % of estimated bad debt1.

          If you're looking for good returns, why not try Vanguard Index funds. Low cost of management and not fuss.

          That's a completely different product.

          Hope this helps.

          Sorry but you seem to have formed a negative opinion solely from reading people discuss its risks on reddit, and not really understand the product or how it compares to alternatives.

          1. https://www.ratesetter.com.au/peer-to-peer-lending/provision-fund ↩

        • Diji1 on 07/04/2017 - 21:19

          @Scrooge McDuck: Bro, in case you don't know, Reddit is a super secret site where the most intelligent people of the internet all gather. You can trust anything you read on there.

        • neil on 07/04/2017 - 23:06

          @Scrooge McDuck:

          The interest income from this is taxed no differently to the interest income from a savings account or term deposit; or income from other investments.

          I think it would be different tax wise if this were an investment. Via ATO.

          Assuming I do the 1 year with Ratesetter vs. buying an investment (buy an ETF, fund, stock, land, whatever) and selling after a year.

          For simplicity, income tax rate of 30%. Both investments make or increase by $100 for the year.

          With Ratesetter my profit after income tax is $70 (100x30%).
          With an investment my profit after income tax is $85 (100x50%=$50x30%=$35 + $50).

          I think this is the case (the numerous tax OzBargainers can correct me) and what charlie was saying (or at least reiterating). So Savings Account < Ratesetter < Investment.

        • Scrooge McDuck on 07/04/2017 - 23:47
          +1

          @neil:

          I wrote:

          The interest income from this is taxed no differently to the interest income from a savings account or term deposit; or income from other investments.

          Investment income is taxable income.

          Certain capital gains are discounted by 50 % if held for a year or more, but capital gains are not income.

    • WaywardOne on 07/04/2017 - 18:55

      Yeah the most compelling thing about this offer is the $75 referral bonus. That alone​ sceptical of any positive vote

  • 8200 on 07/04/2017 - 18:39
    -2

    If they don't pay the loan, you are screwed, the legal fees etc will decimate your capital

    • Scrooge McDuck on 07/04/2017 - 18:41
      +5

      Sorry but you don't know what you're talking about.

      The provision fund compensates lenders in the event of borrower late payment or default, and RateSetter handles any debt recovery procedures themselves.

      • Wally on 07/04/2017 - 18:55

        How do we know that Ratesetter has paid the current premiums to the underwriter of the Provision fund, or that the fund has not been tapped out prior to one joining?

  • db2k on 07/04/2017 - 18:55
    +1

    Playing devils advocate, what are the benefits for a borrower? Compared to say, a broker who can offer highly competitive rates …

    Undecided if this is worth the risk, as I would initially agree with @charlie123 - there is alot of risk, and it would be easy to speculate perceived 'value' and borrow 1k and pay 15% if it attracted 100's of investors …

    If it's too good to be true … it probably is …

    (an ozbargain?).

    • Scrooge McDuck on 07/04/2017 - 19:01
      +1

      what are the benefits for a borrower?

      Personal loans at lower rates than offered by the banks.

      See: https://www.ratesetter.com.au/personal-loans

      • db2k on 08/04/2017 - 14:44

        ah, personal loans … so not home loans …

        I had a friend who want to buy a car instead of paying 10% for a personal loan, they asked for a higher home loan and essentially got a car/personal loan at a home loan rate.

  • mini_wombat on 07/04/2017 - 19:43

    Mhhh … they even write on their website that you might not get back the money after the term is finished - but you SHOULD still get paid principal and interest …

    "However, your lending commitment may be up to two years if at the end of the indicative term there are insufficient lender funds available to replace your principal. In such circumstances you should continue to receive principal and interest payments until there are sufficient lender funds available to replace your outstanding principal, or until the end of the borrower's loan term"
    (https://www.ratesetter.com.au/peer-to-peer-lending/lending-m…)

    OK … then they have a Provision Fund … but the PDS says on page 35: "However, the Provision Fund is not a guarantee nor an insurance product. In the event your funds are matched to the loan of a borrower who is late in making payment or defaults on their loan, you may not be fully or partially compensated by the Provision Fund for a number of reasons."

    Page 37: "In the event that the RateSetter Lending Plattorm is wound up, you will have no entitlement to any residual funds in the Provision Fund."

    Page 38: RateSetter Australia is not a bank and an investment in the RateSetter Lending Plattorm is not a bank account. RateSetter Australia is not authorised under the Banking Act, is not supervised …"
    —> Not a bank!!! The Australian Government will not pay you a cent in my opinion … very misleading in the post.

    No thanks. Negative -1000 !!!

    • Scrooge McDuck on 07/04/2017 - 20:26
      +1

      Mhhh … they even write on their website that you might not get back the money after the term is finished - but you SHOULD still get paid principal and interest …

      This is an investment product. They can't use absolute certainty in their language.

      You need to quantify the risks involved.

      —> Not a bank!!! The Australian Government will not pay you a cent in my opinion …

      Why should the Australian Government be paying you anything? You don't know what you're talking about.

      very misleading in the post.

      Where? It's pretty clear that you didn't read and/or comprehend the OP.

      • mini_wombat on 07/04/2017 - 20:55
        -1

        1. You compare this product to an interest account with a bank … sorry this is not the correct product to compare it with. So I felt it is fair to state that you might not get your money back !!! (As this is not the case with a bank account).

        2. I refer to your statement in the post:
          "Bank deposits with Authorised Deposit-taking Institutions are guaranteed by the Australian Government up to $250,000. So you shouldn't lose your money unless your bank and the Australian Government fail."

        Are you really sure about this. Doubt that ratesetter will fall under this and think it is misleading in your post. You are right … I am no expert … but I personally believe that you are not one either.

        Sorry … it is just a high risk investment (private to private lending) by a new FinTech company … might go well for a while.
        The post is written overly positive without mentioning the high risks … so you need to expect some comments around this. So a negative is a warning for people to read a bit more …

        • Scrooge McDuck on 07/04/2017 - 21:08

          You compare this product to an interest account with a bank … sorry this is not the correct product to compare it with.

          Comparing things doesn't mean that they're similar.

          Compare:

          1. to examine (two or more objects, ideas, people, etc.) in order to note similarities and differences

          So I felt it is fair to state that you might not get your money back !!! (As this is not the case with a bank account).

          Technically, this is the case with a bank deposit too.

          Comparing RateSetter lending to a bank deposit: The risk and return are both higher.

          I refer to your statement in the post:
          "Bank deposits with Authorised Deposit-taking Institutions are guaranteed by the Australian Government up to $250,000. So you shouldn't lose your money unless your bank and the Australian Government fail."

          You have skipped the previous sentence of that paragraph ("Compare this to a bank deposit.") and completely misconstrued it!

          Lending with RateSetter is not a bank deposit nor is RateSetter an Authorised Deposit-taking Institution.

  • canyoudoitcheaper on 07/04/2017 - 19:56
    -1

    How is this even a deal? Not to mention that the promo was first posted on Ozbargain 3 weeks ago: https://www.ozbargain.com.au/node/297340

    OP go read the site rules and try harder next time.

    • Scrooge McDuck on 07/04/2017 - 20:27

      OP go read the site rules

      To which ones are you referring?

  • [Deactivated] on 07/04/2017 - 22:03

    WHAT IF:
    The wife/son/ of the owner of this company borrows (via his/her own company) most of the incoming funds, and uses it as the 10% deposit on many Sydney off-the-plan units. Expecting to sell them before/at settlement for a 20% gain thus tripling her (borrowed) money. She borrows extra to pay the monthly interest payments.
    Sydney prices go up, her company makes $10s millions, transferred to her as a dividend.
    Does it again bigger, Sydney prices don't go up, her company defaults, the loan is "sold" to the provision fund for $1. She keeps the previous transferred profits.

    Is there any condition preventing owners/employees/relatives from borrowing? Is there any external oversight of who the borrowers are?

    "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."

  • shortgum on 08/04/2017 - 05:58
    -1

    Not a deal. should be in forum. for ppl to make own investment decision. higher rate equal other side paid higher rate for your lending

  • powerhead on 08/04/2017 - 07:48

    well done on click baiting - 10% in the title - seriously, this rate is been and gone, highly unlikely to be repeated in at least a month.

    • Scrooge McDuck on 08/04/2017 - 12:16

      The title advertises a range "6–10 %" — six to ten percent, not just 10 %.

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