The lowest car loan rate is 9.7%
One of the requirements is a 'good' credit rating.
https://www.ratesetter.com.au/personal-loans/car-loans
From PDS:
"A sensible approach to risk
We take the risks of peer-to-peer lending seriously. We are very cautious about who can borrow through RateSetter. Borrowers must meet our stringent lending criteria. RateSetter borrowers are creditworthy Australian-resident individuals and businesses who have decided to find an alternative to the big banks and other traditional financial institutions."
"Who am I lending to?
We facilitate lending to creditworthy Australian-resident individuals (aged 18 or over) and creditworthy Australian-resident businesses. As a lender, you may be lending to individuals and businesses. We consider an applicant to be creditworthy if they are approved following our borrower risk assessment processes, which take into account our assessment of their propensity and financial capacity to fulfil their obligations under a proposed loan contract at the time of assessment. Before approving any loan application, we employ credit decisioning processes similar to those of banks and other traditional lenders. These processes include identity verification, anti-fraud checks, credit analysis and assessment of the applicant’s ability to repay their loan. We may perform these checks with the assistance of third parties."
Seems like RateSetter applies similar lending practices to the big banks however it takes 10% of all the interest payments, but no risk to the actual debt itself. Also important to note the provision fund is not insurance against default. Pretty good business model and by the way, you have to lock your money up with them for 5 years to get 8.8%, 3yrs for 7.6%, 1 yr for 4.9% and 1 month for 4.2% per annum.
You have no ability to chose the type of lending your money goes into and it is at RateSetter's complete discretion whether they even pursue the money in the event of a default and just about anything to do with the money once you give it to them.
Not a bad idea, but I can see this blowing up far worse than your bank shares in the event of a recession. Bank shares are around 8% yield grossed up anyways and you own the business so participate in the long term capital growth.
Avoid.
