RateSetter makes major changes to car & personal loan interest rates

Photo by Tim Trad on Unsplash

Online peer-to-peer lender RateSetter has shaken up its car and personal loan products, raising and lowering various unsecured loans by as much as 56 basis points.

RateSetter increased interest rates on its unsecured personal loan products by up to 56 basis points for one and two-year loans, while its three-year fixed unsecured loans were lowered by 49 basis points.

This makes RateSetter’s three-year product much more competitive with a new interest rate of 6.89% (7.31% comparison rate).

Its two-year variable loan however is now much less competitive at 5.60% (6.02% comparison rate) – the lowest available rate is 4.24% at the time of writing (4.81% comparison rate).

Meanwhile, one week prior, it also lowered interest rates on its four and five-year unsecured personal loans by 21 basis points.

RateSetter’s five-year fixed product is also significantly less competitive now, sitting at 10.17% (11.05% comparison rate).

Product	Old interest rate	Change (basis points)	New interest rate
Unsecured variable loan (two-years)	6.16%	56	5.60%
Unsecured variable loan (one-years)	6.16%	56	5.60%
Unsecured fixed personal loan (five-years)	10.38%	-21	10.17%
Unsecured fixed personal loan (four-years)	10.33%	-21	10.12%
Unsecured fixed personal loan (three-years)	7.38%	-49	6.89%

Source: RateSetter 

These loans from RateSetter can be used to buy cars or for other purposes such as debt-consolidation, weddings and medical finance.

The changes listed above are for unsecured loans – most car loan products are secured, meaning the car is used as security against the loan and can be reclaimed should the borrower fail to meet their repayments.

Unsecured car loans don’t require the car to be used as security, which represents a higher risk to the lender.

This higher risk means the interest rate on unsecured loans is likely to be much higher.

A scan of the market shows a typical secured car loan interest rate is around 5%, while unsecured loans might sit anywhere between 8-9% at the lowest, but will often be even higher.

In this case, RateSetter’s two-year variable products have very competitive rates as far as unsecured loans go.

But for longer-terms like five years (which may be required with a car loan), RateSetter’s 10.38% interest rate is fairly noncompetitive, even after a rather significant rate reduction.

RateSetter not the only major personal loan rate change

Earlier in April, Australia’s largest credit union CUA announced a reduction of 201 basis points to its unsecured personal loan products, taking them to what it called a ‘competitive’ interest rate of 9.89%.

CUA’s Head of Product Barbara O’Conor Nash said the personal and car loan market had become very competitive recently, and this change would help customers achieve their ambitions.

“As we approach the end of the financial year, consumers are thinking about their plans for the rest of the year, while considering their financial options required for their future goals,” Ms O’Conor Nash said.

“As tax time approaches, people are also looking carefully at their budgets.

“Offering an unsecured personal loan below 10% p.a. means CUA will be able to help more Australians realise their 2019 goals sooner, without them needing to resort to other finance options which may come with much higher interest rates and fees.”

CUA states this interest rate sits within the top five rates being offered for unsecured loans.

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