Rate Setter

RateSetter's peer-to-peer personal loans have been available in the UK and USA for about 5 years. Peer-to-peer because, unlike the banks, loans of $2,000 to $35,000 for borrowers, are provided by ordinary adults and companies - anyone with a bank account who wants to lend online. And RateSetter's interest rates are- substantially lower. "We connect borrowers to lenders directly and that means we cut out the traditional middle man and by doing so we can reduce costs. Borrowers will automatically be 3-6% better off if they come to us versus a traditional lender but actually in some instances they will be even better off than that."

Daniel Foggo, CEO of RateSetter says banks typically charge 14 to 18 per cent interest on unsecured personal loans, compared with RateSetter's at around 8 to 13 per cent. "We are very confident that it is going to take hold very quickly here by giving borrowers better rates and allowing lenders to have access to a new credit class we think that we have a got a very relevant product."

"The rate that they offered was far more competitive for an unsecured loan, and in addition to the fees and everything that came up it was going to be cheaper for me overall to use RateSetter in the end." Julyan Cassidy took out a $9,000 personal loan from RateSetter at 8.17% for 3 years. Compared with his bank at 13.95% RateSetter saves $888. Factoring in the fees, RateSetter charges $200 for set-up and $565 in assurance risk, a total of $767 in fees. His BANK charges $150 set-up fee + $360 in administration fees, a total of $510, so Julyan is still $633 better off with the RateSetter loan. "For me six hundred dollars in my pocket is better than six hundred dollars in someone else's, so that's why I went with it."

There are a lot of options out there for borrowers who are after some cash. There is no reason why anyone should pay a lot of money for a personal loan. Michelle Hutchison of Finder.com.au which compares financial deals offered across the market. "RateSetter is about the cheapest on the market for a standard unsecured personal loan. There are lenders that are quite competitive though, around almost the same price and that is not taking into account the fees. A lot of lenders for personal loans don't change annual fees or upfront fees so it is possible to get cheaper if you do hunt around."

Whereas most financial institutions stick to their current advertised interest rate, RateSetter's rate is personalised, adjusted according to your credit history and financial situation. So the lower you are as a credit risk, the lower they set your interest rate. Daniel Foggo says "We would encourage people to become aware of what their credit score is what their credit history is, that sort of information you can actually get for free."

Laws on Comprehensive Credit Reporting were introduced a year ago to include positive not just negative information on consumers to give a balanced view of their credit worthiness. But RateSetter says credit reporting bureaus are still sticking to negative data, focussing on defaults and late payment and ignoring good credit behaviour - which impacts on borrowers. "If we can introduce comprehensive credit reporting and have that information flow to the credit bureaus and then to alternative loan providers like ourselves, we think that we will have a much more competitive loan market, and we think consumers will get a much better deal."

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