Lend £1,000 on RateSetter and Earn a Welcome Bonus

Written by Karen Bryan

ratesetterUpdate 9 November 2015 – RateSetter have now increased the welcome bonus to £50 for new customers who deposit a minimum of £1,000. The rates of interest paid also appear to have increased, with the RateSetter Monthly Access account paying 3.4%.

Click here to make your deposit and claim the £50 RateSetter welcome bonus.

I’ve been thinking of becoming a peer-to-peer (P2P) lender for ages. I was attracted by the fact that the interest rates paid to lenders are much higher than on standard savings account with financial institutions.

However, this was tempered by the fact that peer-to-peer lending is more risky, as your deposit, unlike at a bank or building society, isn’t covered by the Financial Services Compensation Scheme (FSCS) which guarantees your cash up to £85,000.

Many P2P websites have a fund set aside to cover bad debts, but if the percentage of bad debts increased dramatically, e.g. if interest rates increase and borrowers can’t pay their P2P loan if their mortgage payments increase, the fund may not be large enough to cover all liabilities.

I also didn’t want to tie up money lent on a P2P lending site. Although most of the sites have a facility allowing you to withdraw cash before the end of the term, there is a financial penalty and the withdrawal is dependent on another P2P lender being willing to take on your loan.

What finally prompted me in action was finding a RateSetter’s referral link, which meant that if I deposited and lent out at minimum of £1,000, I’d receive a £25 credit into my account within 30 days. I thought that would be a nice bonus to the interest earned. The £25 credit is immediately lent in the monthly access market, at the current rate.

Click here to get the welcome bonus credited to your new RateSetter account, if you deposit and lend out at least £1,000.

For my requirements, the best option was the RateSetter Monthly Access, which is repaid at the end of the one month term, which quoted a rate of 2.9%. However, the 6.4% quoted on a five year term looked very tempting.

What you have to realise is that the rate of interest that you’ll receive is not guaranteed to be the one quoted on the RateSetter homepage. You need to make your deposit, by debit card or bank transfer, and then put in an order stating the interest rate that you wish to achieve.

When I placed my order, there was around £5,000 from three orders waiting to be borrowed at a rate of 2.9%. I could have guaranteed lending out my £1,000 immediately, if I’d been willing to accept a rate of 2.7%. I worked out that as long as my deposit was lent out within two days, I’d be better sticking to the 2.9%.

The risk paid off, as after three hours my £1,000 had been lent out at 2.9%, in three tranches.

I was very impressed to receive the £25 referee credit to my RateSetter less than 24 hours after my cash was lent out. The £25 credit was immediately lent out in the monthly access market, at the current rate. But I was a little disappointed that it was only going to earn a rate of 2.6%. That certainly made me think that I’d probably made the right decision to set my reinvestment option at a specific rate, rather than going for the market rate. Of course, that’d only be true if my cash were lent out within a couple of days.

If you plan to keep lending out your cash, you can set up auto-reinvestment at maturity, either selecting the market rate or entering the rate that you wish to achieve. I decided to set it at 3%, as I’d seen a few lenders achieve this rate on their Monthly Access funds and it’s the same rate I can earn on my Santander 123 Current Account on a balance of between £3,000 and £20,000.

Again the risk paid off. On the one month maturity date the full balance of £1,027.44 had been lent out at a rate of 3% for another month before 9am.

Click here to get a weclome bonus credited to your new RateSetter account, if you deposit and lend out at least £1,000.

Warning and Disclosure

Your capital is at risk on a Peer to Peer lending website. I will also earn a £25 credit for a referral. The welcome bonus may be withdrawn or modified at any time by Ratesetter, so please check that the promotion is running before you proceed.