The AER is the “Annual Equivalent Rate”. It allows you to compare our loans against other products, such as savings accounts, although you must be aware that Borrowing Requests and Loans on Ablrate are not savings accounts. The AER operates on the assumption that every interest payment is re-invested. So, for example, where repayments are monthly, you have the opportunity to invest each of those monthly cashflows, whereas if they are paid annually you don’t have the opportunity to re-invest during the year. As an example, if the “Gross Rate” or “Headline Rate” is 12% and it is paid monthly at 1% per month, then that would be equivalent to a 12.683% AER.
Whilst the AER allows you to make a comparison against other financial products, Lending Members should always bear in mind that our loans carry a higher AER than a normal savings account because the products are not identical. In the event of a loss or a default on a loan through Ablrate you will have no recourse to the FSCS protection and so your capital is at risk. Loans on Ablrate are not savings accounts, you have limited access to your money (if at all, until you are able to sell your loans on the Secondary Market), the funds are not insured and not protected by the Financial Services Compensation Scheme. You can lose some or all of the funds you have invested in Ablrate loans. For more clarification of risks please see our Risk Section.