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ReBuildingSociety has announced it is making changes and improvements to its service for both lenders and borrowers. From this Friday it will be implementing a cap on lending rates, as a function of loan risk. In comparison Funding Circle have a 15% cap across all markets, but most loans fall to sub 10% after being listed for a few hours. ReBuildingSociety are also changing the bids so that smallest bid increment is 1% rather than the current 0.1%.
There will also be a new category of "people money" loans introduced in the future where lenders, in return for a higher rate of interest, are required to offer some form of "help" to the business, such as purchasing its products or services.
Here is the full statement from ReBuildingSociety:
We’re pleased with our success to date. We’re growing and we’re attracting plenty of new borrowers. Some of these are long-established and profitable businesses, which would have options to borrow elsewhere.
So we’re improving our platform:
As of Friday 26 April, the following bid caps will apply to businesses listed on our website:
· A-rated business: Max bid 14%
· B-rated business: Max bid 17%
· C-rated business: Max bid 20%
We’re also increasing the incremental amounts at which anyone can bid from one decimal place to whole numbers. So bids will be made at 19%, 18%, 17% rather than 19.1% or 18.5% etc.
Why are we doing this?
We’ve listened to our community, who’ve given us valuable feedback and we’ve acted on their suggestions.
One consequence is faster loan completion. Only making bids with whole numbers will allow the rates on loans to reach the ‘market rate’ quicker – i.e. the level that people will not bid below. A lender will still get the rate they feel is commensurate with the risk, providing they are not outbid, and it improves the rate for borrowers, who are more likely to recommend the service to others and keep the right quality of deals coming through to the site. As a lender, the earlier you bid, the more likely you are to get the best rates.
What this all means
All bids made before Friday 26 April will stand at the original rate, so there is a window of a week to place higher bids on existing A and B applications where the maximum will soon be lower.
Coming soon: High value loans
A largely untapped area of potential in this market is for lenders to become “ambassadors” for their borrowers. We’re shortly going to be introducing an option for borrowers to choose a ‘high value loan’ listing, where high rates of interest are able to be attached to bids, but in return lenders are asked to help that business out in some way. Possibly by promoting it to contacts, purchasing a product / service or even offering to become a non-executive director.
We want value to be created through our platform in a way that institutional finance just doesn’t allow. We call this “people money” and there will be much more on this in the coming weeks and months.
Please get in touch if you need any more information.
Nick, Dan, Julian, Jeremy and the rebuildingsociety.com team
We are very interested in these "people money" loans as this is something that could only be done through peer-to-peer lending.