A new P2P lender on the scene

English peer-to-peer lender RateSetter has entered the Australian market, offering lenders access to the market with investments of as little as A$10.

RateSetter has issued a prospectus outlining a different proposition to the one offered by SocietyOne, the only other P2P lender in the market.

RateSetter, which has written 70,000 loans worth A$700 million since its launch in the UK in 2010, is open to retail investors, who can invest small amounts.

SocietyOne is only open to wholesale lenders, who must have annual income of at least $250,000 or net assets of $2.5 million. SocietyOne chief executive Matt Symons has had to defend the use of the term "peer-to-peer lender" to describe his business.

Another difference is that RateSetter will give lenders full exposure to a single loan, whereas SocietyOne divides each loan into fractions and encourages investors to build a portfolio by investing in a range of loans. Each SocietyOne loan could have as many as 100 investors contributing funds.

A distinctive feature of the RateSetter offer is that it has a "provision fund", which can be used to compensate lenders in the event of a late payment or default.

The provision fund is funded by borrower's fees and is controlled by an independent trustee.

RateSetter will lend between $2001 and $35,000 and all loans are unsecured. Borrowers must be over 24. RateSetter does not lend to businesses.

Like SocietyOne, it carries out a credit check on applicants and matches borrowers with lenders.

Lenders nominate the term of the loan or loans they will fund - from one month to five years and rates are set "according to the supply and demand". Lenders pay a ten per cent fee on the interest they earn.

Indicative rates in the examples on the website are 11.8 per cent for a three-year loan and 11.9 per cent for a five-year loan.