Imothep
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Post by Imothep on Apr 4, 2018 13:15:01 GMT
good morning forum peeps,
i am am new to p2p and would grateful for some insight on how the secondary markets work. i’m sure they are basics but i don’t know the answers so am asking !
if a lender invests into a loan in a big way, say over 50% of the loan amount required , why would you then list it on the secondary market for sale ? does this make you more money ? and what is a discount , i mean, i know what a discount is when i say buy a car , but what does a discount mean when i’m selling a loan on...
thank you
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Liz
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Post by Liz on Apr 4, 2018 14:00:22 GMT
All of the SM markets are different, I've used FS,L,RS,TC for example and there is no way I can sell on UB(and other sites I don't use). Best to ask about the SM on the site boards you use. Some use discounts, others have rolled-up interest, some with fees or loss of interest, whilst others have no SM.
Why sell? Many reasons from needing cash, de risking, tax reasons(on certain sites), to falling out with the site, to finding out new info. So be careful.
A 1% discount is where you buy a £100 loan for £99, again ask about this on site specific boards.
Good luck
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cb25
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Post by cb25 on Apr 4, 2018 14:01:13 GMT
"if a lender invests into a loan in a big way, say over 50% of the loan amount required"
seriously bad idea imo, try for diversification as loans can always go bad
"why would you then list it on the secondary market for sale ?"
lender has decided, for whatever reason, that they don't want so much money lent to that borrower
-over emphasis on the borrower ?
-suspicions as to borrower's ability to pay back the loan ?
-needs cash ?
-better opportunities in other loans ?
-whatever
"does this make you more money ?"
might if lender can
-sell the loan at a premium, e.g. sell £1000 of debt for £1050
-get a higher rate on the loan proceeds somewhere else
"what is a discount"
-discount for the purchaser of the loan, e.g. sell £1000 of debt for £950
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ceejay
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Post by ceejay on Apr 4, 2018 14:03:13 GMT
The details vary from platform to platform - you'll get a more precise answer if you say which platforms you are in.
But just to take a couple of your questions:
Why would someone who had invested in a loan want to sell it on the secondary market? There are probably two main reasons. One would be just to get their money back because they want to use it elsewhere, whether its in another investment or to buy a shiny new TV/car/house. In this sense you'd be using a P2P investment like a savings account, albeit one with a much higher rate of return in exchange for a much higher risk level (up to and including the risk of 100% loss).
Second reason would be to sell at a profit. Some Secondary Markets (but not all) allow you to specify a selling price above (premium) or below (discount) the nominal value of the loan part, which leads straight to your second question...
If you sell a loan part at a discount then you will be paid less than the nominal value of that part. You might sell at a discount because you are in a hurry to get your money out, or perhaps because you now think that loan is worth less than it was. At any rate, what you then have is a pure market, where the value of something (a loan part) is whatever someone is prepared to pay for it. Have a look at the ablrate website for a description of how it works there...
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Imothep
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Post by Imothep on Apr 4, 2018 15:04:25 GMT
thank you, thats all very clear and super helpful, one wonders if it’s just easier to keep it all in the bank ! i suppose half the fun is that you get a little involved with the loans on an emotional level and have the chance to make good interest if you pick good ones ! So far ive looked at FS and FC  |
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cb25
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Post by cb25 on Apr 4, 2018 15:28:29 GMT
thank you, thats all very clear and super helpful, one wonders if it’s just easier to keep it all in the bank ! Yes, clearly, but not as profitable.
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Imothep
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Post by Imothep on Apr 4, 2018 15:43:37 GMT
and not as much fun ..
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Liz
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Post by Liz on Apr 4, 2018 15:48:13 GMT
thank you, thats all very clear and super helpful, one wonders if it’s just easier to keep it all in the bank ! i suppose half the fun is that you get a little involved with the loans on an emotional level and have the chance to make good interest if you pick good ones ! So far ive looked at FS and FC You do have the likes of AC and RS where you don't have to loan pick, have some PF(provision fund) protection in exchange for a lower rate.
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Post by albermarle on Apr 4, 2018 15:50:54 GMT
thank you, thats all very clear and super helpful, one wonders if it’s just easier to keep it all in the bank ! i suppose half the fun is that you get a little involved with the loans on an emotional level and have the chance to make good interest if you pick good ones ! So far ive looked at FS and FC If you invest in the hands off ( sometimes called black box) accounts then it almost as easy as having a bank account , although more risky. Basically you invest your money for an indicative interest rate and then behind the scenes the account buys and sells loans for you . You eventually may get more or less than the indicated rate. If you invest manually in each loan , then it takes more time . Some platforms only do it one of these ways, and some have options to do it both ways. Also the minimum investment amount can vary from £1 to £10,000.
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Imothep
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Post by Imothep on Apr 4, 2018 17:27:34 GMT
thank you, thats all very clear and super helpful, one wonders if it’s just easier to keep it all in the bank ! i suppose half the fun is that you get a little involved with the loans on an emotional level and have the chance to make good interest if you pick good ones ! So far ive looked at FS and FC If you invest in the hands off ( sometimes called black box) accounts then it almost as easy as having a bank account , although more risky. Basically you invest your money for an indicative interest rate and then behind the scenes the account buys and sells loans for you . You eventually may get more or less than the indicated rate. If you invest manually in each loan , then it takes more time . Some platforms only do it one of these ways, and some have options to do it both ways. Also the minimum investment amount can vary from £1 to £10,000. this sounds like something i would be happy to do and then pick some other stuff that i can get more involved in with the story etc , like a property development
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rzys
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Post by rzys on Apr 5, 2018 6:47:47 GMT
if a lender invests into a loan in a big way, say over 50% of the loan amount required , why would you then list it on the secondary market for sale ? does this make you more money ? Couple more reasons, especially on FS: Seller wanting to get rid of tax liability. Seller invested more to get a bonus but now wants to derisk. Seller happy to accept say 4 months interest then wants to avoid default risk at end of term.
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Imothep
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Post by Imothep on Apr 6, 2018 19:30:13 GMT
if a lender invests into a loan in a big way, say over 50% of the loan amount required , why would you then list it on the secondary market for sale ? does this make you more money ? Couple more reasons, especially on FS: Seller wanting to get rid of tax liability. Seller invested more to get a bonus but now wants to derisk. Seller happy to accept say 4 months interest then wants to avoid default risk at end of term. so you can buy , then sell, get the interest for the time you are in and then de risk ? cool !
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rzys
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Post by rzys on Apr 6, 2018 20:14:38 GMT
In theory, yes, but only if someone else is prepared to buy it off you.
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Imothep
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Post by Imothep on Apr 16, 2018 13:29:28 GMT
In theory, yes, but only if someone else is prepared to buy it off you. thank you Rzyz , well understood .....
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Post by df on Apr 17, 2018 20:29:45 GMT
Couple more reasons, especially on FS: Seller wanting to get rid of tax liability. Seller invested more to get a bonus but now wants to derisk. Seller happy to accept say 4 months interest then wants to avoid default risk at end of term. so you can buy , then sell, get the interest for the time you are in and then de risk ? cool ! This works for me so far with FS property loans. Two things to be aware of: 1. You have to apply discount in order to sell, so your return will be lower than headline interest, 2. It is a time consuming strategy.
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