What is RateSetter?
RateSetter, like its main competitor Zopa, aims to make peer-to-peer investing as simple as possible.
The site automatically allocates your money both people and businesses looking to borrow, and aims to cover any late repayments automatically and seamlessly through a compensation fund.
The rates on offer aren't as high as a site such as Funding Circle where you can take a more active role in choosing how to lend your money but are exposed to borrower defaults.
But if you're looking for an experience that is almost as simple as putting money in a savings account, offering better returns for a little more risk, RateSetter could be for you - although remember peer-to-peer should be thought of more as an investment, not as a savings product.
How does RateSetter work?
RateSetter offers three investment options.
- Rolling account: this is the equivalent to an easy-access account. Your investment is repaid by borrowers each month and then reinvested in RateSetter's market. Its average rate is currently 3%.
- 1 year account: your money is investment in loans of up to one year. Its average rate is currently 4.1%.
- 5 year account: your money is invested in loans of up to five years. Its average rate is currently 5.9%.
All rates are after fees but before tax. The minimum investment with RateSetter is £10, and you can invest in either a general 'everyday' account or in RateSetter's Innovative Finance Isa, where returns are paid tax-free.
Once you select which investment option you want, you select what interest rate you want your money lent out at.
If you want to lend your money out almost immediately, so you can start earning straight away, you can opt for the 'market rate', which will be the lowest option.
But you could wait to be matched to a borrower at a higher rate.
How quickly can I get my money out of RateSetter?
This depends on the investment option you've taken, and you may have to pay a fee if you want to get your money out early.
- Rolling account: you can ask for your money back any time for free, but you may have to wait for loans to be repaid
- 1 year account: your money is investment in loans of up to one year. Its average rate is currently 4.0%.
- 5 year account: your money is invested in loans of up to five years. Its average rate is currently 5.0%.
- Minimum amount you can borrow: £500
- Maximum amount you can borrow: £35,000, depending on personal circumstances
- Borrowing term: Six months to five years, depending on personal circumstances
- Can loans be paid off early? Yes, and without any penalty fees
What do RateSetter's customers say about them?
These were some of the comments from members we surveyed who'd invested with RateSetter:
"You need to actively watch re-investments as market rate can be very low and if the rate is set too high it can sit for ages uninvested."
"Their approach to bad debt provisions is good and explained clearly to prospective investors. Regular information on progress on my account."
"They have made investing very easy; it is no more complicated than a normal savings account."
Alternatives to peer-to-peer websites
If you're looking for a loan, it's worth checking out Which? Best Rate personal loans, too.
In almost all cases you'll want to build up cash savings (in Isas or savings accounts) before considering putting your money into a more risky investment such as peer-to-peer lending.
If you're looking for higher returns you might want to consider other investments.
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