RATESETTER has launched a hire-purchase (HP) product for individuals looking to buy vehicles.
Consumers will be able to borrow up to £25,000, but the peer-to-peer lender expects the agreements typically to be around £6,000. The terms range between 12 and 60 months, with APRs going from 19.9 per cent to 49.9 per cent depending on the customer’s creditworthiness.
“We believe that commercial and consumer HP products will broaden our addressable market and enhance RateSetter’s offering to borrowers, while providing a new channel to deliver steady returns to lenders,” the firm said in a blog post on its website late on Thursday.
The ‘big three’ P2P firm said that while the new product does not materially change the risk of investing with the platform, it expects the level of defaults to be higher than its current consumer loan book.
However, “the nature of the security for HP agreements means enhanced recoveries which will protect lenders’ position,” it added.
The vehicle acts as security on the loan. Vehicles are fitted with tracking technology and an immobiliser to facilitate repossession if the borrower defaults.
HP is a secured credit agreement, where a borrower has use of an asset while paying for it through regular instalments. The vehicles will be legally held by RateSetter on behalf of the lenders. The customer has the option to take legal ownership of the vehicle when the final payment is made.
The consumer HP product is now in a three-month pilot period. Customers will initially be originated through Financial Conduct Authority-regulated car dealers, but RateSetter said it intends to allow direct applications in due course.