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Is RateSetter a bank?
We recently received a question from one of our readers about peer-to-peer lending:
I have lent money on a variety of P2P platforms but mainly on Zopa and Ratesetter. It never occured to me to look at the borrowing side of these sites until today. I was interested to see what rates the borrowers were paying on the other side of the Ratesetter 1mth loans. When I applied for a loan the shortest tenor available was 6 months. So I am confused when someone lends 1month money who are they lending it to? The whole point of P2P is to match borrowers and lenders, but it seems in this case this is not happening. Are Ratesetter really a bank in disguise? Is there another explanation?
We'll try and answer this, but we'll invite RateSetter to make a comment.
RateSetter are the only peer-to-peer provider that allows different terms for lenders and borrowers. This is demonstarted through RateSetter's bond for lenders which make up some of the longer term loans for borrowers. The monthly lending is used to fill in the rest of the loan. Lenders can add and withdraw funds to the monthly market at short notice. A borrower may therefore find that their lenders change through the term of a loan.
Here is RateSetter's response:
RateSetter is not a bank. RateSetter does not lend money itself. We help ordinary people lend and borrow money. Borrowers say how much money they need, then they set the interest rate they’re happy to pay. Savers say how much money they want to invest, then they set the interest they’re happy to receive. We simply match them up. You decide the rates. We do the rest. P2P Money is correct in stating that our Monthly Access money is used to help make up part of longer borrower loans.
Hopefully peer-to-peer lending will always be different from banking.