RateSetter pioneered the Provision Fund concept in peer-to-peer lending as a way to offer greater predictability for investors. It has ensured that no individual investor has ever lost a penny, although past performance is not a guarantee for the future.
All borrowers pay into the Provision Fund in accordance with RateSetter’s assessment of their creditworthiness. Sometimes even a creditworthy borrower can miss a payment. If this happens, the Provision Fund automatically reimburses investors. This means that you keep receiving your repayments, when you are expecting them.
The Provision Fund diversifies every investor’s risk across the whole loan portfolio, so that the performance of investments is determined by the performance of the whole loan portfolio, not the individual loans that an investor may be matched to.
Find out more about the Provision Fund here.