By investing via RateSetter, you are lending your money to people that wish to borrow on RateSetter.
If some of these people do not pay back their loans there are provisions in place to mitigate the risk:
- Excellence in underwriting: robust credit and affordability checks on all borrowers
- Portfolio management: RateSetter’s loan book is diversified across many borrowers of different types and channels
- The Provision Fund: if a borrower misses a payment, the RateSetter Provision Fund reimburses the investor; if the loan goes into default, the Provision Fund takes over the loan and repays outstanding capital to the investors. However, repayment by the Provision Fund isn’t guaranteed and your capital and interest are at risk if the Provision Fund is depleted by increased borrower defaults, and investments are not covered by the Financial Services Compensation Scheme.
Learn more about RateSetter's protection here: https://www.ratesetter.com/invest/everyday-account/protection