Ratesetter review: peer-to-peer lender's best rates, risks and more

RateSetter is popular with peer-to-peer beginners in the UK, but its rates can be beaten. Here's our review of its loans, rates, risks, fees and more.

RateSetter is a peer-to-peer lender that lets has carved something of a niche by making its service look and feel similar to traditional savings accounts. 

As such, the P2P firm, which connects lenders and borrowers, is known as a popular destination for those who are new to peer-to-peer.

In this article, we'll look at how Ratesetter works, what rates are on offer and the maximum and minimum sums you can invest (or borrow).

But before we dive in we should stress the golden mantra of all P2P investments: your capital is at risk and you can lose some or all of your money.

This article is part of a wider series on investing, covering all areas from stocks and shares to buy-to-let, peer-to-peer and alternative investments. Click here to view the full guide.

Who are they?

RateSetter was founded in 2010 by Rhydian Lewis (pictured) and has been used by more than 62,633 lenders, to lend more than £2.4 billion.

Readers of financial data site Moneyfacts have voted RateSetter the Peer-to-Peer Provider of the Year for the last three years.

Who do they lend to?

RateSetter will lend to either individuals or businesses.

What products are available?

For lenders

You start by deciding how much to lend: you can start with £10.

You then decide how long to invest for.

You can pick ‘rolling’  that you can withdraw from at any time without penalty.

Alternatively, you can choose fixed terms of one year or five years in return for a better market rate.

You can cash out of these at any time, as long as the loan can be matched with another lender.

A transfer fee of 0.3% for the one year and 1.5% for the five-year option apply.

Finally, you choose what rate you want: you can pick the market rate or opt for your own.

You will then be matched with a borrower happy with those terms.

If you choose a rate that’s higher than the market rate, you won't be taking on more risk but you may have to wait longer to be matched with a borrower. 

To give you an example of the rates you might receive, you can currently get 3% on the access account and 3.7% on the five-year account (after fees and bad debts have been factored in).

RateSetter offers an Innovative Finance ISA, which allows ISA transfers in.

Just like the standard investment options, ISA investors can opt for a rolling market option, one year or five-year options – again there are fees for withdrawing early.

For borrowers

You can borrow between £1,000 and £25,000 – depending on your circumstances.

You can have the money for between six months and five years – again depending on your circumstances, and you can pay the loan off early without any penalty.

What protection is in place?

As with all the peer-to-peer lenders, protection starts with RateSetter checking the creditworthiness of everyone it lends to.

However, there is always the chance of defaults. If you lend to someone who does not pay, you risk losing money.

To mitigate this, RateSetter has a Provision Fund, which is designed to repay any money you lose (as do many other P2P lenders). 

To date, it has repaid every single penny, but there are no guarantees.

It's worth pointing out that Ratesetter – and most P2P lenders for that matter – were launched after the last financial crash so have enjoyed relatively calmer waters than older firms.

As with all peer-to-peer sites, it is not covered by the Financial Services Compensation Scheme.

It means that if the firm was to go under, you wouldn’t have the same sorts of guarantees in place.

Compare returns from different peer to peer lenders on loveMONEY's comparison site.


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