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RateSetter Cashback Made Most Worse Off
Higher lender demand forced RateSetter interest rates downwards in the first two weeks of July, as RateSetter tempted more lenders to lend more money with a cashback offer. (See RateSetter's Interest Rates Tank.)
Now the cashback deal is over, interest rates in most – but not all – RateSetter's lending products have climbed again.
The cashback you could have received was £100 cashback for lending £10,000, £50 for lending £5,000 and £25 for lending £2,500.
The question is, are you better off with the cashback and lower rates?
If you lend monthly, you were not entitled to cashback. Even so, interest rates plummeted during this time. So you will unquestionably have been worse off lending during the cashback period than just before or after it.
If you are lending in the one-year market, you might expect to be around £50 better off if you lent £10,000 if you got lent during the cashback period.
If you lent closer to £20,000 you might have roughly broken even. Any more and you would have been better off lending before or after the cashback period.
If you lent £5,000 you might be around £25 better off and if you lent £2,500 you might be £10-£15 better off with cashback. If you lent just under £10,000 you would have been worse off and or just under £5,000 you might have broken even.
If you lent £10,000 or more for three years during the cashback period in return for £100 cashback, you could easily end up worse off due to the lower interest rates available during the period. It depends precisely when you lent, but, at best, you probably won't be more than a handful of pounds up over three years.
If you lent less than £10,000 you can strongly expect to be worse off with the cashback.
You could easily have ended up about £200 worse off with £100 cashback on £10,000. The more you lent, the worse off you'll be. It would have been very difficult to end up better off.
If you lent less than £10,000 for £25 or £50 cashback you have very low chances of being better off over the next five years.
Where are rates now?
The monthly-, one- and three-year rates have bounced back to be within their previous range. (See table in RateSetter's Interest Rates Tank.)
The five-year rates are remaining doggedly lower at around 5.6% to 5.8%. Previously, for nearly half a year, they had been between 6.4% and 6.9%. This will knock off around £100 of interest over the next five years.
So it looks like new lenders attracted to RateSetter by the cashback offer are continuing to pile more money into the five-year loans.
I think RateSetter‘s* rates still look fine though for the risks involved. You're still looking to earn as much as £800 over five years, even if you don't re-lend any loan repayments you receive.
RateSetter's nearest competitor offering higher rates is probably Lending Works*, which increased its five-year rate to 6.6% today.
Over three years, RateSetter is generally offering slightly higher rates: 5%-5.4% versus Lending Works' 5.1%.
Read more about RateSetter and Lending Works in Get Started With The Safest Peer-to-Peer Lending Websites.
*Commission, fees and impartial research: our service is free to you. 4thWay shows dozens of P2P lending accounts in our accurate comparison tables and we add new ones as they make it through our listing process. We receive compensation from RateSetter and Lending Works, and other P2P lending companies not mentioned above either when you click through from our website and open accounts with them, or to cover the costs of conducting our calculated stress tests and ratings assessments. We vigorously ensure that this doesn't affect our editorial independence. Read How we earn money fairly with your help.