Post by nick on Feb 5, 2016 13:52:14 GMT
Does anyone know to what degree of accuracy interest on loans are calculated and if on the basis of individual loan parts held or the balance held in a particular loan issue? I've seen a number of 1p parts for sale on the secondary market (presumably by people testing bots or by bot feeders with nothing better to do) and I wondered if you would ever collect interest on the part as it would need to be outstanding for over 4.5 years before more than 0.5p would be accrued and presumably rounded up to 1p?
I assume it can't be simple rounding as it could be subject to significant abuse, eg subscribing to 50p parts would lead to 0.5p in monthly accrued interest, which if rounded up to 1p and paid at the end of the month would effectively double your return for that month. I suppose you would be penalised the following month, but you could sell the loan part prior to that. Conversely, if interest is only paid on rounded down amounts, would the seller just forfeit the fractional interest if sold after one month.
Apologies if there has already been discussion on this topic, but I couldn't see any specific mention of it.
I assume it can't be simple rounding as it could be subject to significant abuse, eg subscribing to 50p parts would lead to 0.5p in monthly accrued interest, which if rounded up to 1p and paid at the end of the month would effectively double your return for that month. I suppose you would be penalised the following month, but you could sell the loan part prior to that. Conversely, if interest is only paid on rounded down amounts, would the seller just forfeit the fractional interest if sold after one month.
Apologies if there has already been discussion on this topic, but I couldn't see any specific mention of it.
