RateSetter Review

The RateSetter platform launched in 2010 and offers investors the ability to lend funds in the form of personal, business and property loans. The platform features a provision fund designed to cover any unexpected interest and capital losses, and further seeks to mitigate risk via diversification.

If you find my RateSetter review useful and choose to sign-up after reading, I would really appreciate if you would sign-up via my referral link. Currently, you will get £50 cashback for investing £1,000.

Updated view on in light of the ongoing Coronavirus pandemic (20/09/2020)

RateSetter has started to experience investor liquidity issues due to withdrawal levels exceeding new deposits and has temporarily reduced interest rates to bolster its provision fund. This means that there is a large queue to withdraw funds from the platform. Investors should be aware of this before investing. Personally, I would not currently invest as the interest premium is not sufficient in my view to justify the lack of liquidity.

RateSetter - Personal, business and property loans.
RateSetter P2P Logo

Name: RateSetter

Description: RateSetter is currently offering a great cashback promotion, whereby if you invest £10, you will receive £20 cashback.

  • Returns
  • Safety
  • Time in business
  • Hands off investing

Summary of key features

Launch date2010
Estimated annual returns3.0% to 4.0% (same underlying product, target rate depends on whether you want fee-free withdrawal). Investors can theoretically set an interest rate of up to 5.0% over the going rates.
Loan securityMajority of loans are unsecured consumer loans. Business loans are subject to director guarantees whilst property loans are asset-backed.
Provision fund
Early exit
Auto re-investment
Innovative Finance ISA
FCA regulationAuthorised
Cashback offer£20 when you invest £100 (200.0%)
Sign-up linkSign-up

Detailed RateSetter review

RateSetter first launched in 2010 and has grown to become one of the largest, most successful P2P platforms operating in the UK market. Over £3.6 billion has currently been invested through RateSetter, with over 80,000 P2P investors.

Where will my funds be invested?

RateSetter is primarily exposed to personal loans with smaller exposures to property loans, business loans and other lending businesses.

When investing via RateSetter, you do not personally choose the underlying loan investments. Instead, your funds are automatically distributed to individuals or entities deemed creditworthy by the RateSetter credit underwriting team.

How does RateSetter work?

RateSetter offers three main investment types: Access (3.0% target rate), Plus (3.5% target rate) or Max (4.0% target rate) accounts. Each of these accounts invests in the same underlying loans. The sole difference is the level of withdrawal fees. Funds invested into the ‘Access’ product will be subject to zero withdrawal fees, whilst Plus and Max are subject to 30 days and 90 days interest charges, respectively.

Investors can theoretically achieve an interest rate of up to 5.0% above the going rate on each of these accounts. See our ‘set your own interest rate on Ratesetter‘ article.

What is the minimum investment required?

The current minimum investment is set at £10, which means you can dip your toes in the water with a small exposure. Currently, you can get £20 cashback when you invest £10 via this link.

How good is the investment performance reporting?

The RateSetter dashboard simply shows the amount of money in your account, the expected interest rate (i.e. the interest rate at which your funds are loaned to borrowers on the platform) and interest accrued.

You can also generate tax statements which summarise your taxable income in any tax year.

What are the key risks of investing through the platform?

Investing via RateSetter is not directly comparable to investing via a bank savings account (if it was, it would not be possible to generate the target interest rates). Whilst RateSetter is authorised by the FCA, money invested does not fall under the FSCS protection scheme which applies to banks. There are therefore two key risks to consider:

Risks of borrowers not repaying – RateSetter seeks to mitigate this risk via the existence of a provision fund which is intended to cover any borrower default. This fund is discretionary and relies on the existence of sufficient funds. At the time of writing, the interest coverage ratio is 120.0% whilst the capital coverage ratio is 261.0%.

RateSetter goes into administration – If RateSetter ceased trading, your underlying loan investments would remain legally binding. RateSetter is required (as a result of its FCA authorisation) to have a fully funded run-off plan which would be activated and administered by a third party. If RateSetter were to go into administration, it is unlikely that funds would be readily accessible to withdraw prior to the end of the underlying loan terms.

How and when can I exit my investment?

Provided there is sufficient demand from other investors, it is quick and easy to sell your RateSetter investment. I initially invested £1,500, but later withdrew £500 as wanted to redistribute funds to other P2P platforms. I submitted the request on 4 March 2019, and the funds were in my account and available for withdrawal one day later (5 March 2019).

How easy is the sign-up process?

I found the sign-up process to be very quick and easy. If you are interested, you can set up an account with no commitment to investing funds (click here).

How can I pay money in?

The RateSetter platform accepts payments via debit card or bank transfer. Neither methods have a fee imposed.

Do RateSetter offer an IFISA?

Yes, RateSetter offer an IFISA. The same investments are available in the IFISA as in the classic accounts, with the only difference being that no tax is paid on savings interest generated via an IFISA.

What cashback does RateSetter offer its new investors for standard accounts?

RateSetter is currently offering £20 cashback to new investors who sign up and invest £10 via this link.

Whilst you should never invest solely on the basis of cashback offered; this particular deal seems a bit of a no-brainer (in my personal opinion) to test out the platform given the limited risk associated with a £10 investment.

I personally invested £1,500 via the RateSetter platform on 20 January 2019. A different cashback offer was operating at this point in time, but I received my cashback as expected with no issues experienced.

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