angrysaveruk
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Post by angrysaveruk on Jun 18, 2014 11:35:02 GMT
With Rate Setter Rates currently at 6.2% for a 5 year meaning that with the 1% spread borrowers must be paying in the region of 7.2% who exactly are they lending to? Banks are currently offering unsecured loans at under 5% for 5 years so are these lower credit grade borrowers?
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oldgrumpy
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Post by oldgrumpy on Jun 18, 2014 11:57:26 GMT
With Rate Setter Rates currently at 6.2% for a 5 year meaning that with the 1% spread borrowers must be paying in the region of 7.2% who exactly are they lending to? Banks are currently offering unsecured loans at under 5% for 5 years so are these lower credit grade borrowers? I get the impression that the banks' "5%/5 years unsecured" will only actually be offered to "favoured" applicants, and the rest will be quoted much higher terms, so Ratesetter and other lenders may well pick up a lot of those falling just below the banks' strictest criteria.
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markr
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Post by markr on Jun 18, 2014 12:32:58 GMT
Having been on the receiving end of a bank's "Computer says no" attitude, I can well believe that perfectly credit-worthy people are turned down by their banks, or offered APRs well above the representative rates. For someone rolling over a credit card at 20-odd% APR, RS's rates must seem pretty good.
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Post by davee39 on Jun 18, 2014 14:30:10 GMT
I have a feeling Zopa are 'giving away' money to the safest borrowers with loans at around 3.5%. The RS mix includes Giffgaff, with some fairly high rates on short term but riskier loans. Overall I suspect RS are going slightly up the risk scale & I am confident that the provision fund is fairly well padded.
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spiral
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Post by spiral on Jun 19, 2014 8:41:05 GMT
Currently the PF has a coverage ratio of 2 times with estimated claims @ 2.8m @<1.7%. Even if default rates hit 3 times this, it would only result in an average loss of about 1.5% per lender. These swings occur daily in the stock market. Also if the business is growing, you'd get the Ponzi effect whereby you can use tomorrows money to pay today's debt. The PF used to show this figure but I've just had a quick glance and can no longer see it. Maybe the regulator didn't like it  but when I last saw it, it was about 4 times greater than the actual coverage meaning that today, it would finance defaults of about 13.6%. I must add at this point though, if the defaults got anywhere near this, lenders would be out like a shot thus creating a shrinkage of the business leading to no more Ponzi effect. |
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markr
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Post by markr on Jun 19, 2014 9:53:56 GMT
At those sort of rates, it's getting close to being worth borrowing money on Zopa and lending it on RS!
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angrysaveruk
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Post by angrysaveruk on Jun 20, 2014 8:43:57 GMT
At those sort of rates, it's getting close to being worth borrowing money on Zopa and lending it on RS! I wonder what they would say if you put the reason for the loan on Zopa as investing in RateSetter 
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Post by davee39 on Jun 20, 2014 10:16:57 GMT
I have about £10k from zero interest credit cards in RS, and have been maxing out like this for some years. Unfortunately, following retirement, my pension is insufficient to allow me to keep repeating this trick. The borrow Zopa and lend on RS only works for non taxpayers, who would be unlikely to get the best rates. As a general rule borrowing to invest is the start of a steep descent into penury.
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angrysaveruk
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Post by angrysaveruk on Jun 20, 2014 15:55:40 GMT
I have about £10k from zero interest credit cards in RS, and have been maxing out like this for some years. Unfortunately, following retirement, my pension is insufficient to allow me to keep repeating this trick. The borrow Zopa and lend on RS only works for non taxpayers, who would be unlikely to get the best rates. As a general rule borrowing to invest is the start of a steep descent into penury. I had thought about that myself, 10k invested at the 1 year rate of 3.8% is £380 for free assuming there isnt a major problem with the economy. Although I dont want any more exposure to rate setter at the moment but the idea of screwing the financial system like that does appeal to me
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Post by westonkevRS on Jul 15, 2014 6:12:20 GMT
Another RateSetter partnership has been announced, this time with Pay4Later, ensuring your lending money is working hard and not waiting in queues: www.pay4later.com/leading-peer-peer-lender-ratesetter-partners-pay4later/Nice quote as well - "Provision Fund was the first of its type in the P2P industry in the UK to help protect savers against the risk of borrower default. It is also the largest at £6m and no saver has lost a penny since its 2010 launch, a unique feat amongst the major P2P platforms" |
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Post by teapothouse on Jul 15, 2014 7:35:35 GMT
This is an interesting development and I can see that the ability to lend money on offer would be very quick and possibly a decent volume depending on the number of outlets and from where credit is chosen for any purchase. The pay4later website quotes a 10 second turn around on credit checks at point of sale (presumably after entering a some detail in on-line forms). I presume ratesetter supplies the money at an agreed rate and they (pay4later and the shop) take the risk?
You may like the line on their about us page which says "Pay4Later works with reputable, established finance companies...."
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but when I last saw it, it was about 4 times greater than the actual coverage meaning that today, it would finance defaults of about 13.6%.
