jimc99
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Post by jimc99 on Oct 12, 2015 3:07:36 GMT
I got a friend to join RateSetter. He received a welcome email containing the following paragraph:
"2. Early access.
Want to earn the 5 Year rate but concerned about putting money away for years? Don't worry, with our Sell Out feature you can access your money at any point for a small fee."
My understanding has always been that if you Sell Out from a 3 or 5 year market then the amount returned to you would be calculated to "recover" the amount of interest earned at the higher rate and replace it with appropriate interest for the time your money was lent out. So selling out a 5 year loan after say 3 years would mean you lose the 5 year rate and get maybe the 3 year rate. Selling after 1 year gets you the 1 year rate, etc.
Obviously if all one had to do to sell out was pay a small fee then it would make sense to only lend out on the 5 year rate and ignore the lower markets.
Could RateSetter explain how the money returned from a Sell Out is calculated. Is it really simply a small fee or is there a penalty for not keeping the money in for the original term?
Thanks.
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Post by westonkevRS on Oct 12, 2015 5:43:02 GMT
I got a friend to join RateSetter. He received a welcome email containing the following paragraph: "2. Early access.
Want to earn the 5 Year rate but concerned about putting money away for years? Don't worry, with our Sell Out feature you can access your money at any point for a small fee."My understanding has always been that if you Sell Out from a 3 or 5 year market then the amount returned to you would be calculated to "recover" the amount of interest earned at the higher rate and replace it with appropriate interest for the time your money was lent out. So selling out a 5 year loan after say 3 years would mean you lose the 5 year rate and get maybe the 3 year rate. Selling after 1 year gets you the 1 year rate, etc. Obviously if all one had to do to sell out was pay a small fee then it would make sense to only lend out on the 5 year rate and ignore the lower markets. Could RateSetter explain how the money returned from a Sell Out is calculated. Is it really simply a small fee or is there a penalty for not keeping the money in for the original term? Thanks. I guess it depends on your definition of "small", as personally I as a risk manager prefer the liquidity safety that comes with making withdrawal from a long term saving agreement expensive. Also we need to avoid "gamers" who take the 5-yr rate but treat the product as per monthly, knowing the "fee" will be less that the extra interest they gamed. This is a question for Customer Services. RateSetter doesn't have an official presence on this site, despite my tag as an employee (which is true). The calculation follows a methodology but does provide different results depending on the market rates and point though 5-year lending. In addition it could change, and so posting here would wrongly give the impression of "forever". My only advice, only lend on 5-years if you currently have every intention of staying for 5 years. Do not go in thinking, it's OK I can get my money. IMHO the sell-out is for emergencies, not a get out clause. Kevin.
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adrianc
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Post by adrianc on Oct 12, 2015 7:03:33 GMT
Just having a play with sell-out, to see HOW expensive it is...
If I try to withdraw £5k from the 5yr market, it'll cost me just over £25. If I try to withdraw £10k, it'll cost me just under £98. I suspect that, if I tried it when the last-matched rate was higher, it'd be cheaper.
I don't think that particularly expensive at all - certainly compared to any kind of three- or five-year savings account, where it's quite probably physically impossible to get at the money early except in the direst of situations.
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locutus
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Post by locutus on Oct 12, 2015 7:06:59 GMT
I have some money in the five year market which has been there for 1 year already. I just tried the sell out calculation and whilst rates are in my favour (i.e. the rate now is worse than when I lent so no assignment fee needs to be paid), the total fees requested by RateSetter equate to 3.4% of the total capital being sold out.
I have asked numerous times for transparency around the sell out feature and for visibility of the formula used to calculate fees and never had a satisfactory response.
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locutus
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Post by locutus on Oct 12, 2015 7:09:16 GMT
Just having a play with sell-out, to see HOW expensive it is... If I try to withdraw £5k from the 5yr market, it'll cost me just over £25. If I try to withdraw £10k, it'll cost me just under £98. I suspect that, if I tried it when the last-matched rate was higher, it'd be cheaper. I don't think that particularly expensive at all - certainly compared to any kind of three- or five-year savings account, where it's quite probably physically impossible to get at the money early except in the direst of situations. For me, trying to withdraw 17k would cost £593 in fees which I would class as very expensive.
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pikestaff
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Post by pikestaff on Oct 12, 2015 7:20:33 GMT
jimc99 Your understanding is correct. I went looking on the revamped website for the full Ts & Cs and could not find them. (I could find the website Ts & Cs but not the lender Ts & Cs.) However, after some hunting around I found this, which accurately reflects the Ts & Cs as I remember them: "What's the catch?
There are a few things you need to be aware of - fairly straightforward but important to know.
- Firstly, when you choose to sell out, you could have to wait until a replacement investor arrives. As we say above, this normally happens instantly as RateSetter is very liquid but we want to flag the idea that you might have to wait. At least during this time, your money will still be earning interest
- Secondly, when you sell out, the rate you earn will be reduced to reflect the amount of time you actually ended up investing for. For example, if you invest for five years but sell out after a year, our system works out what you would have got had you invested for a year and this is what you receive; invest for one year and sell out after four months, and you'll get the monthly rate and so on. We think it’s simple and fair: you get what you would have got
- Lastly, at the time of selling out, the rates available on RateSetter may have risen since you started to invest. So a gap needs to be filled between your rate and the rate the new investor taking on your contracts needs so that they don’t lose out. Luckily, our system instantly works out what that gap is and lets you know the amount to pay to fill that gap (minimum 0.25% of your investment). It’s only fair and is usually a small price to pay to get early access your money. Sadly, if rates have gone down you won’t get the benefit – that accrues to RateSetter in return for them running and managing the sell out service"
It's on this page but you have to scroll down to find it: www.ratesetter.com/lend/accessHow many newbies would actually find this page is open to question. The website is a real maze. Before you get to the relevant info you are likely to have seen: - on www.ratesetter.com/lend, in a list toward the bottom of the page "You can request access to your money anytime for a small fee with our sell-out option, even if you invest for 5 years"
- on www.ratesetter.com/lend/products, in both the 3 and 5 year columns, "You can access your money at any time for a small fee"
The last statement is particularly bad because whilst you can request access it is not guaranteed. The Access page explains this but you have to find it and the website does not exactly point you in that direction. I suppose you could say there is a small fee (the minimum 0.25%) plus extras, but the extras add up and can be very significant (and, as the last few posts show, may vary a lot depending on the circumstances). I have no big problem with the terms myself and agree with the reason for them, but I don't like being unable to find the full Ts & Cs any more and I do think RS should reconsider the "small fee" statement. I agree with westonkevRS that the sell-out function is really for emergencies, but that is not the impression the website sets out to give.
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ikorodu
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Post by ikorodu on Oct 12, 2015 7:56:41 GMT
Of my 10845 that is spread over all 4 markets (mainly in the 5 year) I would get back 10719 if I was to sell out now. My 10845 earns an average of 5.7% so to me the sell out fee looks ok.
Surely if we have an idea of the variables involved in the sell out calc and enough data from lenders on their sell out fees the formula could be 'reverse engineered'. Not by me I might add, but by someone with a better grasp of maths than I!
The marketing email saying you can get the cash out for a small fee is clearly misleading and needs to be changed. The fee is variable, can not be calculated by the lender, and is dependent on market rates at the time. Additionally the email referenced in the first post fails to mention that getting at your cash is dependent on liquidity in the market that could dry up very quickly.
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adrianc
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Post by adrianc on Oct 12, 2015 8:42:22 GMT
For me, trying to withdraw 17k would cost £593 in fees which I would class as very expensive. 3.4% of the withdrawn amount. Six months interest, give or take. Thinking a bit further on the low figure it's given me, I'm guessing that's because I do have about £11k at 6.1 and below, from my early days on RS. I wonder whether it's worth paying the 0.5% fee, and reinvesting it at a higher rate... Hmmm... I've got a snidge over £4k at 6.0% and below - and trying to withdraw that would cost me £13. £2k would cost me a fiver. Trying to withdraw the £420 I have at 5.8% and 5.9% would cost me a quid. Last Matched is currently 6.1%, my average 5yr is 6.4%. I'll try again when LM is higher.
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oldgrumpy
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Post by oldgrumpy on Oct 12, 2015 8:44:40 GMT
For me, trying to withdraw 17k would cost £593 in fees which I would class as very expensive. 3.4% of the withdrawn amount. Six months interest, give or take. Thinking a bit further on the low figure it's given me, I'm guessing that's because I do have a chunk of 5.8/5.9 from my early days on RS. I wonder whether it's worth paying the 0.5% fee, and reinvesting it at a higher rate... Hmmm... You won't be doing that at today's market ratemate!!
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sl75
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Post by sl75 on Oct 13, 2015 14:23:58 GMT
For me, right now, the first £100 would be a (just about reasonable) 2.4% fee, rising to more than 11.4% for the last £100 (the latter percentage is not directly visible anywhere - they sting you for an extremely high incremental charge without even giving you visibility of it!), for an overall blended fee of 5.9% for selling out the entire portfolio (5 year loans only, mostly from 2014, but oldest loans dating back to 2012). Far more impressive figures were there when I still had some 3 year loans, where some of the fees were in excess of 50% of the value of the being raised via sell out. The blurb that is quoted from the email in this opening post makes it absolutely clear that RS's motives are not in blocking the kind of "gaming" that westonkevRS describes - if jimc99 accurately quoted them, they positively encourage people who don't want to tie up their money for 5 years to participate in the 5 year market anyway (exactly the kind of "gaming" that westonkevRS says he doesn't want). I can only assume this is a cynical ploy to dupe unsuspecting investors into paying these excessive and opaque fees. A perfectly reasonable interpretation of what people might EXPECT RateSetter to do would be for each contract, calculate the number of months since the start of the contract, multiply by the difference in monthly interest (or 1/12 of the difference in annual interest), and multiply this by the value of the capital being sold out. RateSetter's opaque and over-complicated calculation results in a far higher fee for mature 3 and 5 year loans. If anyone feels compelled to do so, feel free to calculate the fee based on this simple calculation, see how much higher RateSetter's calculation is, and ask them to explain exactly how they account for the difference... I've already discussed it with them as much as I care to, given that I've never personally paid a sellout fee, and never intend to. In many ways, I think RateSetter was a better all-round product BEFORE sellout was introduced, and especially so now that marketing appear to be making false promises of a cheap exit.
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adrianc
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Post by adrianc on Oct 13, 2015 15:02:58 GMT
3.4% of the withdrawn amount. Six months interest, give or take. Thinking a bit further on the low figure it's given me, I'm guessing that's because I do have a chunk of 5.8/5.9 from my early days on RS. I wonder whether it's worth paying the 0.5% fee, and reinvesting it at a higher rate... Hmmm... You won't be doing that at today's market ratemate!! 6.7%'s just been matched...
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oldgrumpy
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Post by oldgrumpy on Oct 13, 2015 15:31:40 GMT
You won't be doing that at today's market ratemate!! 6.7%'s just been matched... Grrrrrrrump! And I only offered 6.5% Way over the 5.2% of just 32 hours ago, though!
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shimself
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Post by shimself on Oct 13, 2015 15:53:40 GMT
... RateSetter doesn't have an official presence on this site, despite my tag as an employee (which is true). ... You are tagged as a representative of Ratesetter, and I have always taken your comments as such.
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Post by gaspilot on Oct 13, 2015 15:54:39 GMT
I took out £10k in February costing me £330 in fees. I did this thinking in the long term I could get more. I re-invested the money in SS @12%. So after 8 months (approx) I've lost £330 (fees) and £400 (approx) in interest. However, I've gained £800 in interest from SS so now I'm up having made that decision and any future profits will be greater than if left in RS. Usual caveats apply however. That was my reasoning.So far so good.
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Post by westonkevRS on Oct 13, 2015 16:09:19 GMT
A lot of the quotes in this thread have come from the marketing blurb, especially the (possibly unhelpful) "small fee" statement.
Members can see more detail within the Lender Agreement within the members area of the web page. Which as of today (13th October 2015, i.e. it could change so don't hold this thread and me to account forever), includes:
The “Sellout” function
6.1.
You should be prepared to lend for the full term set out in your offer to lend. You may be able to withdraw matched funds before they are repaid by the borrower by using the "Sellout" function but this will only be available where there is another RateSetter Customer willing to take over the role of lender for the remainder of the Matched Loan(s) affected.
6.2.
Using the Sellout option may result in the overall interest earned being significantly lower than the Lender Rate you selected when making your original offer to lend. This is because the amount returned to you will be adjusted to account for the lower interest rate applicable to monies invested over a shorter term and for any change in the rates available on the Exchange.
6.3.
The amount returned to you when you use the Sellout function will equal the capital amount requested plus interest accrued to the date of the Sellout, minus the Return Fee and any Assignment Fee. The amount will be estimated and displayed to you before you commit to the Sellout.
6.4.
To calculate the Return Fee, we will:
6.4.1.
determine the total interest you earned on the capital you want to withdraw up to the date of the Sellout (‘A’);
6.4.2.
determine the longest term available at the time your funds were originally matched that would have expired before the date of the Sellout;
6.4.3.
calculate the total interest you would have earned if your funds had been invested at the Market Rate on the term determined by clause 6.4.2 (‘B’);
6.4.4.
calculate the difference between A and B (the “Interest Deficit”); and
6.4.5.
set the Return Fee as the greater of:
i. 0.25% of the capital being returned; or
ii. the Interest Deficit.
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