Chris Alexander

On Engineering


Online investment platforms

30th June, 2018

Last week I wrote about FundingCircle, an online investment platform. Another one I have been trying out is Ratesetter, so I thought I would write about that too.

Important note these articles will focus on the websites and how they operate as described by the sites themselves, and won’t include discussions of their performance or returns. All of these sites are investment products and you may get back less money than you put in. You should familiarise yourself thoroughly with the websites before using them. No part of these articles constitutes financial advise, nor should they be taken as such.

Ratesetter works slighly differently to Funding Circle in that it matches loans to investments in a market-style way. There are three ways of investing - fixed for 1 or 5 years, or on a rolling basis. Locking your money in for longer gives you access to better rates, but at a high level your investment’s interest rate is governed by the market when your money is invested.

The advantage of this approach is that your money is usually invested quickly if you choose the rolling option - you’re just matched to the loans that are available for funding at that time. It doesn’t guarantee you the best rate, but you can go in and set a minimum rate if you’d like to hold your money until the rate goes up.

The most interesting part is you can also view the current market spread, much like you would for currency trading; it shows you how much money is waiting to be loaned at each interest rate. This gives you a better idea, when you create a custom rate, just where you should position your money so it will still be lent, but so you get a better rate.

One condition of Ratesetter is that it much prefers deposits by bank transfter; you are allowed three free deposits by debit card, and from then onwards it is a chargeable service where bank transfers remain free. We did a small deposit by debit card to get started, and it’s a useful way to test out the service.

The site itself is quite busy, given it aims to achieve quite a simple set of tasks. As with Funding Circle and all of these other services, once your money is in there’s not a lot that you can do other than present data about how it’s getting on. It does take quite a while to dive in and to find the more detailed information that you might be looking for, for example the market rate is presented almost as an afterthought rather than really being integrated into the site.

That being said, the whole site and service has been perfectly fine so far, so we are continuing to use it.