RateSetter P2P Question

Knapper

Hi folks


Question for those who use RateSetter (or maybe other P2Ps)


I have downloaded RS's Loan Book from their website and filtered it for:


- Loans of 12 months only
- Rows applicable to 2019 Q1


I've been monitoring the 1yr lending rate on RS most of Jan/Feb and typically the market rate has fluctuated from 3.7% to 5.5% as far as I could see.


However the loan book for 2019 Q1 and for 12 month loans has numerous entries with Gross Interest Rates from 10% up to 20% in it.


What gives?


Is there some way that people can actually lend at 10% - 20% for 1 yr loans or is this RS managing to get borrowers willing to pay those kind of rates for 12month loans and if so how?


presumably I am misunderstanding what "Gross Interest Rate" means or something else

verybigchris

Ratesetter likes to portray itself as matching lenders to borrowers, but that's not how it works. You lend money to RS, and they lend it out again. The margin between what borrowers pay and what lenders receive is where they make their money.

Knapper

verybigchris wrote: »

Ratesetter likes to portray itself as matching lenders to borrowers, but that's not how it works. You lend money to RS, and they lend it out again. The margin between what borrowers pay and what lenders receive is where they make their money.

Yep I totally expected that but I didn't think the "spread" could be so vast.


Who is borrowing money on a 1yr term with a 20% interest rate?


Just don't get it

MarkFromCornwall

I don't know who the borrowers are but there are certainly occasional spikes in the market. If you are prepared to monitor the rate very closely you might get lucky and get a very high rate (but you might have cash sitting in a holding account earning nothing while you wait for a spike). I managed to lend some money at 8.4% in the one year market. However it seems likely that some such loans will be repaid early.

GiddyInvestor

RS have a variety of places where they lend. One big part is a tie up with GiffGaff where they provide people with loans for mobile phones. The rates for these small loans easily match the 10% to 20% profile as they go to people who often have no credit history or a poor credit record. While higher risk I am sure that the expected default rate can be predicted very closely. I have no problem with this form of lending as opposed to large loans to commercial or speculative property investors.

firestone

GiddyInvestor wrote: »

RS have a variety of places where they lend. One big part is a tie up with GiffGaff where they provide people with loans for mobile phones. The rates for these small loans easily match the 10% to 20% profile as they go to people who often have no credit history or a poor credit record. While higher risk I am sure that the expected default rate can be predicted very closely. I have no problem with this form of lending as opposed to large loans to commercial or speculative property investors.

They do property development loans already and have just hired as looking to step up that market so would guess some of them loans would be at a high percentage as well

GiddyInvestor

Yes I am aware of the property loans and that gets me nervous. They lost the plot on the car loan lending which was set up outside of their control. The losses would have come close to triggering problems if they had not found the money from externally rather than from the provision fund. Bad decisions on a few large property loans could mean game over. At the moment I am slowly reducing exposure but if they can go another year without foul ups I will go in stronger again.

soulsaver

verybigchris wrote: »

... You lend money to RS, and they lend it out again. ..

That would make a significant legal difference to what they do and what they appear to say they do - which would be fraud.

Where are you getting this info. from?