ratesetter

Lenders Can Use New Sellout Function to Exit Loans Early at Ratesetter

wiseclerk 1 Comment

Ratesetter yesterday introduced a new sellout function that allows lenders to exit their contracts early.

How does it work?
Lenders request the amount they wish to have returned to their Ratesetter Holding Account. Ratesetter works out whether this is possible and calculates the cost of doing so. The Lender confirms their wish to go ahead and then Ratesetter processes all the necessary assignments. The Borrower will remain entirely unaffected by this.

What are the costs involved in exiting early?
Ratesetter charges a fee made up of three elements:
•    The exiting Lender’s interest is reduced to the level they would have received based on the length of time they have ended up lending for. This is based on the Market Rate and products available on the day they originally lent. So, for example, if the lender had lent into the 5 Year Income market nine months ago and choose to exit now, the lender would only receive the interest the lender would have got from lending in the Monthly Access market for that period of time; if the lender had lent 13 months ago the lender would only receive what the lender would have got from lending in the 1 Year Bond market; if the lender had lent 37 months ago, the lender would only receive what the lender would have got from lending in the 3 Year Income market. With regard to an early exit from the Monthly Access market, the cost is that the lender forgoes all the interest for that month. The purpose of this charge is to ensure there is no incentive to lend for five years if the intention is only to lend for two years;
•    A fixed charge for administering the exit which is 0.25% of the oustanding contract amount (currently waived for existing Lenders for a period of one month)
•    An “Assignment Fee” to ensure that if the interest rate in the relevant Ratesetter market has gone up the exiting Lender can still exit. This will calculate and deduct from the exiting Lender the amount required to be added to the interest rate to ensure the incoming Lender gets what they expect.  In circumstances where interest rates are the same or lower there will be no Assignment Fee.

Can the lender choose which individual contracts I sell?
No, the contracts will be automatically selected, starting with the most recent contracts.

Where does the incoming Lender come from?
From the same market as the exiting Lender.

Are there any circumstance when the lender would be unable to exit early?
It is Ratesetter’s  intention that the lender will be able to exit all contracts at any time. However, it may not always be possible to do so:
•    If there are insufficient funds in the relevant market. This will be determined by a “buffer” of available funds (of which the amount in each market will be periodically reviewed) designed to keep the smooth running of the Ratesetter markets.
•    If an individual contract is less than £10, the current minimum reinvesment size.

Offering a secondary market (regardless in which form) is becoming a basic functionality that lenders expect as a core feature from a p2p lending service. The 3 major British services Zopa, Ratesetter, Fundingcircle as well as American Lending Club and Prosper now offer the ability to sell loans. In other countries regulation makes the setup of a secondary market difficult.

Ratesetter Adds More P2P Lending Choices

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Ratesetter yesterday added more choices. Borrowers can select loan terms of up to 5 years.  Lenders can invest money for 1 or 5 years (in addition to the existing monthly access and 3 year term choices). It is interesting that Ratesetter has decoupled the borrower’s products from the lender’s products. For a borrower loan with an 18 month term there is no directly matching lender product. Ratesetter will combine funds invested in monthly access with money invested in 1 year bonds to fund these loans.

Bottom line of this, as I see it, is that Ratesetter will steer towards more active management of the money invested. Unlike other p2p lending marketplaces that act more like a platform, but where the users alone make the investment decisions, Ratesetter will directly take action.

Adwords Marketing Activity of British P2P Lending Marketplaces

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I did some research on use of Google Adwords in the online marketing strategy of Zopa, Funding Circle and Ratesetter.

Who is most active in search engine advertising?

I was surprised to see that Funding Circle is the most active in advertising on Google Adwords.

The chart shows that Fundingcircle had active ads nearly the whole year, while Zopa ran the ads only for certain intervals and Ratesetter only gave it a small try. Continue reading →

UK Borrowers Benefit From Lower Interest Rates at Ratesetter

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Borrowers needing a small loan can turn to p2p lending marketplace Ratesetter, which matches borrower requests with funding supplied by private lenders. Borrowers can choose a variable rate loan (rolling loan) or a 36 months fixed rate loan. Nominal rates for the 36 months loan have fallen considerably in the past six months from approx. 9% to now under 7% (that translates to a representative APR of slightly under 9%).

Ratesetter has facilitated over 10 million GBP in loans since its inception.

Last week Ratesetter completed raising  series C round of funding, raising 1.5 million GBP (approx. 2.35 million US$). The total amount raised so far is 3 million GBP.

RateSetter CEO Rhydian Lewis said: ‘…RateSetter is continually working to narrow the spread between what Savers can earn on their money and what creditworthy Borrowers can pay. This investment will ensure that customers will continue to get great value and a great service‘.

RateSetter Finishes Successful First Year

wiseclerk 1 Comment

In England p2p lending service RateSetter celebrated it’s first year in business anniversary a few days ago. The loan volume matched is close to 9 million GBP, spread out over 2.400 loans.RateSetter has currently about 65.000 members.
RateSetter has a rather unique business model in the p2p lending landscape which builds on anonymously matching demand and supply for two loan “products”: 36-month loans and rolling loans (the total loan volume is spread nearly 50:50 on these products).

RateSetter says that due to the provisions fund mechanism “every single RateSetter lender has received every single penny of capital and interest that they expected.“. The fund is an instrument set up by RateSetter to “reduce the risk for lenders“. Borrowers pay an amount upfront into the Provision Fund based on their creditworthiness.  Yesterday RateSetter announced that on Sep. 3oth the team managing the Fund decided not to distribute any money from the Fund back to the lenders, which is possible if the team considers the Fund to be excessivly capitalised.

Borrower representative APRs ranged from 7.6% to 11.6%. 79% of borrowers are homeowners. The two purposes car loans and home improvement loans were given for more than 50% of the loans. In the last six month, interest rates for 36 months loans on RateSetter have been falling, whereas the rates for the rolling loans remained mostly at the same level.

RateSetter is a founding member of the Peer-to-Peer Finance Association (see: ‘Peer-to-Peer Finance Association Founded by British P2P Lending Services‘).


(Source: RateSetter)

Peer-to-Peer Finance Association Founded by British P2P Lending Services

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Zopa, Fundingcircle and Ratesetter announced the launch of the ‘Peer2Peer Finance Association‘.

The members say that the new UK trade body is set up primarily to ensure the growing sector maintains high minimum standards of protection for consumers and small business customers, as it brings much-needed new competition and innovation to the banking market. In Britain this year, peer-to-peer finance will account for more than £100 million of loans to individuals and small businesses. As new financial regulatory structures are put in place by the Government over the next 18 months or more, the Peer-to-Peer Finance Association will also work hard to ensure that the new rules will include effective regulation for the peer-to-peer finance market.

The association is open to other peer-to-peer providers subject to meeting the required standards.
The Association has established a wide definition of peer-to-peer finance providers as:
‘platforms that facilitate funding via direct, one-to-one contracts between a single recipient and multiple providers of funds, where the majority of providers and borrowers are consumers or small businesses. Generally, funding is in the form of a simple loan, but other instruments may evolve over time.’

The Association’s Rules and Operating Principles set out the key requirements for the transparent, fair, robust and orderly operation of peer-to-peer finance platforms and cover:
1. Senior management systems and controls;
2. Minimum capital requirements;
3. Segregation of participants’ funds;
4. Clear rules governing use of the platform, consistent with these Operating Principles;
5. Marketing and customer communications that are clear, fair and not misleading;
6. Secure and reliable IT systems;
7. Fair complaints handling; and
8. The orderly administration of contracts in the event a platform ceases to operate.

Rhydian Lewis, CEO of RateSetter, said: “The message we want to send to the wider world is that Peer to Peer is working: Lenders across a number of sites are getting market beating returns on their savings, Borrowers are getting lower cost loans, and increasingly P2P finance is becoming more established in the mainstream. As an industry, we would all encourage clearer regulation of P2P finance (not least because it would address the perception that P2P is somehow not regulated). The Association will give us a platform with which to lobby for P2P to be considered on an equal footing with other financial services.”

This is the first formal trade organisation of p2p lending services. In the US several companies including Prosper and Lending Club did combine efforts to lobby for congress to ease regulation on p2p lending. Users on the other side, united in the PIVN in the Netherlands.