Please note: the investment side of RateSetter closed on 2nd April 2021.
All money was returned to investors’ Holding accounts from 2 April to 6 April, with no investment release fees applied.
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
Protecting your investment
We never forget that we're looking after your money and only invest in loans that will benefit both borrowers and investors. Our experience of lending helps to ensure that RateSetter’s portfolio of loans performs well.
Remember, while your investment is matched to an individual, your investment benefits from the scale and stability of the overall portfolio, currently £850 million. For an added layer of stability, we created the Provision Fund.
However this is not a guarantee for the future and your capital and interest are at risk if the Provision Fund is depleted by increased borrower defaults.
How it works
As is normal, people who take out a loan pay interest on the money that they have borrowed. At RateSetter, part of the interest goes to you, the investor, while another part goes directly into the Provision Fund.
The Provision Fund grows along with the portfolio size and repayments made by borrowers. The money that is in the Provision Fund is a buffer to protect your investment. It does this by automatically reimbursing you if a borrower’s payment is missed.
How we manage the Provision Fund
We manage the size of the Provision Fund so that there is more money in there than all the expected missed payments by borrowers. We continually monitor the performance of loans and our Provision Fund and if needed we can make adjustments:
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Underwriting - lending criteria on new loans
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Portfolio – mix of loan and borrower types
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Provision Fund – payments made by borrowers into the Provision Fund
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Loan management – loan life-cycle and collecting missed payments
Thorough arrears management: for the small proportion of borrowers who miss payments, RateSetter’s specialist arrears management team has a 3-step plan designed to help get things back on track:
- Debt review and affordability analysis to assess borrower's unique situation.
- Consolidation strategy offered to reduce debt repayments.
- Repayment plan adjustments to increase likelihood of full repayment.
Provision Fund scenarios
Key risk indicators
Interest Coverage Ratio: 101%
When the Interest Coverage Ratio is higher than 100% there is enough money in the Provision Fund to ensure that you will earn all the interest that you expected.
Capital Coverage Ratio: 180%
When the Capital Coverage Ratio is higher than 100% there is enough money in the Provision Fund to ensure that you will get back at least as much as you put it in.
The coverage ratios are snapshots in time that assume that RateSetter will make no adjustment to the Provision Fund or the portfolio’s performance in order to keep your investment on track. RateSetter will implement a Stabilisation Period when it reasonably believes that the Provision Fund does not have sufficient funds (including expected future inflows) to cover current or expected borrower defaults.
Learn more