Following the Covid-19 outbreak and the current economic environment, RateSetter announced on 4 May a temporary reduction in interest for the remainder of the year. During this time, investors will receive only 50% of their interest with the other 50% going to the Provision Fund, for the protection of all investors.  Also, since the outbreak, the time it is taking investors to release their investments is currently longer than normal. Further information is available here. 

A diversified portfolio.

A diversified loan portfolio

Responsible lending to creditworthy borrowers

Your money is only lent to borrowers who are creditworthy when the loan is granted and can demonstrate that they are able to pay back the loan. Borrowers’ creditworthiness may change over time and cannot be guaranteed. Your initial investment and any reinvestments could be matched with new or existing consumer, property, asset or other loans detailed below. 

Our loan portfolio

Our borrower risk
categories

We put the different types of borrower who borrow through RateSetter into four risk categories:

Consumer

All applicants are assessed for creditworthiness and affordability (using, at a minimum, credit reference agency and application form data).  Additional rules are applied, relating to the credit history of the individual, depending on the type of loan they are applying for.  All of this data is combined to produce a score which drives the APR and risk expectations of each individual loan.

 

Lending criteria required at application:

  • UK resident with ID and residency confirmed
  • All applicants assessed for creditworthiness and affordability (using, at a minimum, credit reference agency and application form data)
  • Applicants must be at least 18 years old at the point of application
  • No Bankruptcies, Individual Voluntary arrangements (IVAs), Debt relief orders (DRO) or Trust deeds
Purpose Car purchases, home improvement loans, debt consolidation and retail purchases
Loan size

Typically £500 - £25,000 (in certain circumstances up to £100k)

Interest rates

Typical borrower APR: 3.9% to 29.9%

Loan term

12 - 60 months

Sources of loans Direct to RateSetter, price comparison websites, other partnerships
Protection
  • Loans are unsecured
  • Provision Fund provides “first-loss” buffer against credit losses
Expected future losses

Estimated based on quantitative analysis of actual loss data 

Securities No security
Guarantees

No guarantees

 

 

 

Property

We undertake credit reference agency searches on both the business and the directors behind the business. An initial appraisal of the project is undertaken prior to credit assessment including understanding the experience of the developer and an assessment of the proposed project. All potential sites are visited.  Independent third party professional due diligence is then also undertaken on behalf of Ratesetter by suitably qualified and experienced professional firms in the form of a professional valuation, a detailed initial project report from a monitoring surveyor (and ongoing monitoring of the project) and legal due diligence including a Report on Title.

 

Lending criteria required at application:

  • Min 5 years previous development experience of similar schemes
  • Max Loan to Cost 80%
  • Max Loan to Gross Development Value 65%
  • Full Planning permission to be held
  • Min 10% contingency on hard construction costs
  • Development Exit – Max 70% Loan to Value
Purpose Secured property loans for property development (typically up to 65% LTV) and Development Exit Loans (typically up to 70% LTV)
Loan size

Up to £10m

Interest rates

Typical borrower APR : 6.5% to 9.5%

Loan term

Typically 12-24 months

Sources of loans Direct to RateSetter and Brokers
Protection
  • Ratesetter has first legal charge security against the properties
  • Provision fund provides “first-loss” buffer against credit losses
Expected future losses

Estimated based on the strength of the property proposal and LTV

Securities 1st legal charge over the subject property/properties
Guarantees

Cost & Interest overrun from Directors/shareholders

 

 

Asset

We undertake credit reference agency searches on both the business and the directors behind the business.  The business’s financial accounts and the personal guarantors’ asset and liability statements are analysed to demonstrate serviceability and security ratios. Other supporting information is also obtained and assessed as part of the risk assessment. A Risk Rating is applied to each facility which determines the credit rate paid to the provision fund.

 

Lending criteria required at application:

  • New and used business assets
  • Two years’ filed accounts and three months’ bank statements
  • Credit searches on the business and principles behind the business
  • Financial analysis and affordability from cash flow financial statements
Hire Purchase  
Purpose Hire purchase agreements to small and medium sized businesses
Loan size

£25,000 – £500K

Interest rates

Typical borrower APR: 5.0% to 24%

Loan term

12 – 60 months

Sources of loans Direct to RateSetter and Brokers
Protection
  • Directors typically provide personal guarantees.
  • Provision Fund provides buffer against credit losses
Expected future losses

Estimated based on quantitative analysis of actual loss data

Securities RateSetter will take full security over the underlying asset
Guarantees

Typically, where the asset offers poor security value a guarantee from the directors / shareholders will be taken

 

 

 

Other

giffgaff

Purpose

To buy mobile phone handset

Loan size

Typically £300 - £1,000

Interest rates

Typical borrower APR: 18.9%

Sources of loans Via giffgaff website
Protection
  • Loans are unsecured
  • Provision Fund provides "first-loss" buffer against credit losses
Expected future losses

Estimated based on quantitative analysis of actual loss data

Security

No security

Guarantees No guarantees

 

 

Lending criteria required at application:

  • UK resident with ID and residency confirmed
  • All applicants assessed for creditworthiness and affordability (using, at a minimum, credit reference agency and application form data)
  • Applicants must be at least 18 years old at the point of application
  • No Bankruptcies, Individual Voluntary arrangements (IVAs), Debt relief orders (DRO) or Trust deeds

 

 

Family finance (discontinued in January 2020)

Purpose Divorce litigation funding
Loan size

Typically £10,000 - £500,000

Interest rates

Typical borrower APR: 14.9%

Loan term

12 - 24 months

Sources of loans Direct to RateSetter via solicitors
Protection
  • Loans are secured against the proceeds of the divorce settlement
  • Provision Fund provides “first-loss” buffer against credit losses
Expected future losses

Estimated based on quantitative analysis of actual loss data 

Securities Loans were secured against the proceeds of the divorce settlement
Guarantees

No guarantees

 

Lending criteria

  • Credit search on the individual
  • Aged 21 or over
  • The estate must include UK property
  • UK resident only
  • Assessment on the borrowing to equity ratio to ensure sufficient headroom

 

 

Lending businesses (discontinued in December 2016)

Purpose

Lending to individuals and businesses via third party specialist lenders (e.g. motor loans, guarantor loans)

Loan size
  • £2m up to £32m per lending business
  • They lend onwards to individuals (£1-10k) and businesses (£40-100K)
Interest rates

Lending business borrows at: 7% to 10%. Typical end-borrower APR: 40% to 60% 

Sources of loans Direct
Protection
  • Third party lending business provides “first loss” buffer
  • Provision Fund only takes losses if the lending business defaults
Expected future losses

Estimated based on the probability of third party default and the costs of RateSetter taking over and running off the underlying loans

Security

No security

Guarantees No guarantees

 

 

Business unsecured (discontinued in January 2018)

Purpose

Lending to UK SME Businesses to fund working capital

Loan size

£25,000 - £500K

Interest rates

Typical borrower APR: 5.0% to 15%

Sources of loans Direct to RateSetter and Brokers
Protection
  • Directors typically provide personal guarantees
  • Provision Fund provides buffer against credit losses
Expected future losses

Estimated based on quantitative analysis of actual loss data

Security

RateSetter may take over assets if business (typically for loans over £150K)

Guarantees Typically, RateSetter will take a guarantee from the directors/shareholders

 

 

Lending criteria at application

  • Loan for business purposes only including the funding of working capital
  • 2 years' filed accounts and 3 months' bank statements 
  • Credit searches on the business and principles behind the business
  • Financial analysis & affordability from cash flow financial statements
  • No equity finance, LBO or mezzanine debt

 

 

Individuals secured (discontinued in April 2019)

Purpose

Car purchases

Loan size

Typically £500 - £25,000

Interest rates

Typical borrower APR: 19.9% to 49.9%

Sources of loans Direct to RateSetter, via car dealers
Protection
  • Loans were secured on the vehicle
  • Provision Fund provides "first-loss" buffer against credit losses
Expected future losses

Estimated based on quantitative analysis of actual loss data

Security
  • Loans were secured on the vehicle purchased
  • Selected vehicles are fitted with a tracker/immobiliser
Guarantees No guarantees

 

 

Lending criteria required at application:

  • UK resident with ID and residency confirmed
  • All applicants assessed for creditworthiness and affordability (using, at a minimum, credit reference agency and application form data)
  • Applicants must be at least 18 years old at the point of application
  • No Bankruptcies, Individual Voluntary arrangements (IVAs), Debt relief orders (DRO) or Trust deeds

The Provision Fund we offer does not give you a right to a payment so you may not receive a pay-out even if you suffer loss. The Fund has absolute discretion as to the amount that may be paid, including making no payment at all. Therefore, investors should not rely on possible pay-outs from the Provision Fund when considering whether or how much to invest.  Learn more

Loan fee breakdown

The loan contracts facilitated by RateSetter contain no fees for lenders. Lenders may have to pay a Release Fee depending on the investment product they have chosen.

Borrowers are charged fees to pay RateSetter for its role in originating and servicing the loans and to contribute to the Provision Fund. These fees vary by term, amount and the creditworthiness of the borrower. They are split between being charged at the outset and through the term of the loan.

As of the last 12 months, the average of the split of those fees is set out in the table below:

Average borrower rate 11.3%
Average borrower fees 7.0%
Borrower Provision Fund contribution 4.0%
RateSetter fees 3.0%
Average investor returns* 4.3%

* During the temporary interest reduction, there is a 50% reduction in interest.

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