Places I hide my money: RateSetter

This is a post about RateSetter and how I see it as useful for planning for FIRE.  GFF is still on paternity leave and hopefully everything is fine with the family and new baby.

I like the idea of investing money in the stock market (better returns for 1) but I’ve been a long time user of P2P investments.  I have been a fan of P2P investments for a long time (before everyone hated the banks and the credit crunch) and I have been investing for over a decade with P2P with good and bad results.  In theory, the performance should be like a turbocharged bonds and you do get good rates of interest but without the chance of capital growth that you get from stocks.  Interest rates on savings are poor as are bonds – so P2P is an alternative for investors.

One place I find useful and would recommend is RateSetter.

With P2P The overall performance has been good (about 12% IRR over 12 years) – but I do feel sometimes that it’s a cross between a well paid hobby and an time consuming investment strategy.

Certainly, there are a number of investment platforms out there – and I’m not going to cover them all in this post.  This is a good place to find out more.  What I would say is that now I am a parent and time management is one of the key skills of successful parents, when I look at P2P investments I have the following criteria:

  1. Good returns
  2. Easy & quick to use
  3. Safe/secure investment

With P2P, an important rule: Remember that return of capital is more important than return on capital!


One platform which ticks all these boxes is RateSetter.  I’ve been investing through rate setter since May 2011 with decent returns of around an IRR of 7%.  What is interesting about RateSetter is that it involves very little time to manage your account and I’m very happy to put money in and let it work away for me.  Now, with 2 kids (at time of reading, not writing), I value my time much higher and I am happy to sacrifice half a percent for convenience and time saving.  Ratesetter also has a contingency fund for bad debts which means that if the SHTF, you should not lose out.

At the moment, if you join Ratesetter through my link you can get a £100 bonus if you lend £1000 for a year (and I’ll get a £50 bonus to buy my kids shoes).

Anyway, I’ve been looking at my investments and trying to see how I can make a good return without spending too much time on it and I’ve decided to invest more into Ratesetter on their 5 year Fixed rate product.

This is where you lend say £1000 at 6% fixed and the capital is repaid monthly – it could be someone borrowing to buy a car or pay for home improvements.  Anyway, you receive a fixed amount back each month from rate setter – part interest and part capital.

What I like is that it allows invested money to generate a future cash flow – meaning that I know if I put say £1000 in today, I’ll get (roughly) £20 a month back for the next 5 years/6 months.  Managing cash flow is a key part of early-FIRE – I want it working for me and also accessible for me when I need it.  I don’t want to be forced to borrow money when I have shares/investments I could use and likewise, I don’t want to sell investments just because I’m short of money one month. By having a monthly repayment, I get a reliable future cash flow stream.  It could easily be used to provide the fist 5 years of FIRE if you like.

.  There is also a one-year and rolling monthly product – where your money is tied up for a time and you are repaid (with interest) at the end.  I have some investments that are maturing right now and dumping all that money into the stock market in one go might end up being a bad decision if there is a stock market crash!  So, I intend to spread things out a bit with the help of Ratesetter (and my trusty expense spreadsheet and cash flow forecast)

The returns at the moment also look very good, at the moment the 5 year rate has been hovering around 6%+ which is very good compared with a no-risk savings account.  I used to have some 5 year loans that were 8% but 6% plus is good – especially as the rates are creeping up.

For UK tax payers, there is a tax-free allowance of £1000 for savings interest – meaning you could have £16,000 in Ratesetter paying 6% interest and pay no tax on it whatsoever.  You can also get loss relief on any bad debts.  And you can also hold an IFISA if you like and pay no tax at all!

It’s not to say that it’s a risk free investment, and I would recommend you understand what the risks are.  What I do like about Ratesetter is that it is easy to use, transparent and they have great customer service.  And if you are comfortable with the risk and want to get £100 for free (and £50 for me, think about signing up.

Thanks, GFF


  1. I have used Ratesetter for roughly 3 years. My experience has been great with them, even the switch from standard account to their new innovative ISA. So my experience seems similar to yours. I think many people outside the personal finance bubble see the term ‘peer-2-peer’ is an immediate turn-off.

    My position is that I have money saved for a house deposit and would like to potentially ‘pull’ the funds at quick notice but also get a modest rate of return. I am easily achieving on a ‘rolling’ account basis 3+% (usually 3.2 to 3.4%). You can set up a minimum interest value e.g. Set it at 3.2% and they will not put your money back on the market until it reaches that as a minimum. Note: you may end up not having any money out and subsequently not making any money if you do not keep tabs on the market rate.

    Ratesetter works so well I have to remind myself on two fronts: 1) That I need to ensure my overall portfolio is diversified 2) I have not really seen how this peer-2-peer lending system will cope when a crisis occurs.


    1. I have been investing in peer to peer during the last crisis and was badly affected with bad debts but overall it has been overall positive and relatively strong returns and a good alternative to stocks.


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