dan83
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Post by dan83 on Mar 3, 2017 22:05:21 GMT
Hi,
I have been reading the website, the FAQ and the part about the secondary market and interest.
I understand that the interest is paid at the end of the loan and not a bit every month.
I don't understand the part about interest and the secondary market.
If I sell a £100 loan part for £100, will I still get interest for the time I held the loan, when the loan ends, or do I need to sell the loan at a premium?
I've read it a few times and it just doesn't make any sense at all to me.
Thanks
Dan.
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dan83
Posts: 243
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Post by dan83 on Mar 3, 2017 22:10:01 GMT
Also, when a loan goes live, is it fastest finger 1st, do you prefund like SS or are people limited to the amount they can put in for 24hrs like MT?
Thanks
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dzo
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Post by dzo on Mar 3, 2017 22:31:43 GMT
When you sell a loan part the buyer pays your accrued interest, then they get the full interest when the loan repays.
Let's say you invest £100 in a 12% loan. If held for the entire 6 month term you'd expect to get £6 of interest. Now let's say you decide to sell after exactly three months. In this scenario, the buyer will pay your £3 on top of the purchase price to cover your accrued interest. The buyer will then get the full £6 at the end of the loan term.
This is all separate from any extra money you get by selling at a premium.
To answer your second question, it is fastest finger first but you don't usually need to be very fast. Some loans take weeks to fill.
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elliotn
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Post by elliotn on Mar 4, 2017 2:44:05 GMT
Click on Available Investments. Emails confirm when bids can be made and there can be limits for smaller loans. Activation occurs after the loan is filled and funds have been disbursed to the borrower.
As dzo says, potentially FFF for the most desirable or possibly quite a wait, your interest is covered by the borrower if sold on SM regardless of the price you sell the loan capital for.
Edit - removed tax comment that I cannot confirm.
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archie
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Post by archie on Mar 4, 2017 7:17:45 GMT
While you have an investment for sale, price to the buyer will automatically increase each day to cover the accrued interest. There is no income or capital gains tax to pay on the sale of a primary market loan part.
On the flip side, if you purchase something on the secondary market you may be liable for income tax on both the accrued interest and any subsequent interest. That depends on your tax situation.
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dan83
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Post by dan83 on Mar 4, 2017 7:24:26 GMT
Thanks for all the replies guys.
I understand it now, it works kinda like funding circle, but interest is in one lump at the end, not monthly.
It's also nice to know loans can take a while to fill as I struggle to be online at a precise time, due to work.
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Liz
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Post by Liz on Mar 4, 2017 8:47:08 GMT
Thanks for all the replies guys. I understand it now, it works kinda like funding circle, but interest is in one lump at the end, not monthly. It's also nice to know loans can take a while to fill as I struggle to be online at a precise time, due to work. Also, you accrue interest from the day you bid on an auction, so bid early. The SM does offer some bargains, 1-2% discount, so buy my loans for sale  Click on a loan to buy on the SM, click and amount and it will show you the price breakdown. You don't get monthly interest like other sites, but the trade off is higher rates. Good luck.
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oldgrumpy
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Post by oldgrumpy on Mar 4, 2017 11:58:55 GMT
Bottom left on your dashboard - Click Tax Statements.
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Liz
Member of DD Central
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Post by Liz on Mar 4, 2017 12:07:32 GMT
Still thinking about investing on this platform but the tax situation still doesn't seem clear. Has anyone had a interest and tax summary from FS for tax year 2015/16 which could offer some enlightment, or could someone give some clarity after 5 April 2017. Do FS even produce an interest and tax summary?
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SteveT
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Post by SteveT on Mar 4, 2017 13:36:44 GMT
oldgrumpy , Haven't joined yet, so have no dashboard! but good to know they have a tax statement. Thank Liz , but I have read that about the secondary market. I was referring to the different opinions regarding the Primary market taxation highlighted in the quotes. The sale of a PM part is, by definition, a SM trade.
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mikes1531
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Post by mikes1531 on Mar 4, 2017 15:28:34 GMT
I was under the impression that there is a difference in treatment in regards to tax depending on whether you were the original holder when the loan was issued compared to having purchased it on the secondary market? I'm none the wiser!  Edit: I've re-read the taxation section and that seems to clarify a bit more, it does seem different to other platforms. AIUI, you're dealing with a 'Simple Debt' and the rules that go along with those. There's info on the HMRC website regarding how these are treated with respect to CGT, and there does appear to be a difference depending on whether you invest in a loan when first offered or buy a part on the SM. I thought I had found info regarding how they are treated for income tax, but I can't find it again now. If you invest in a loan when first offered and then sell the part, the extra money you receive instead of the accrued interest doesn't go into your year-end tax statement from FS as part of the total interest reported as earned. All of the interest is reported to the investor who was holding the part when the loan was repaid. And yes, it is different to how other platforms seem to operate. I should declare that I'm no expert on this subject, and the above is only a statement of my understanding. As such, you can't rely on it and need to seek proper advice elsewhere.
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Post by eascogo on Mar 4, 2017 17:55:52 GMT
I was under the impression that there is a difference in treatment in regards to tax depending on whether you were the original holder when the loan was issued compared to having purchased it on the secondary market? I'm none the wiser! Edit: I've re-read the taxation section and that seems to clarify a bit more, it does seem different to other platforms. In case it helps here is an extract of my (redacted) FS tax statement: Tax Statement 06/04/2015 - 05/04/2016 Total interest earned £xx5.24 Tax deducted £0.00 Total £xx5.24 Capital loss from your investments 06/04/2015 - 05/04/2016 Capital Loss £0.00 FundingSecure
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Liz
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Post by Liz on Mar 4, 2017 18:19:09 GMT
I've never held a loan to term, but have sold loans on the SM at both a profit and loss, my tax statement shows interest earned at 0.00.
The loan parts I bought on the SM shows the interest including the interest earned from the previous holder.
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dan83
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Post by dan83 on Mar 5, 2017 17:39:11 GMT
So I have registered, why is there so much on the secondary market? At these rates, they would of been snatched up in no time on SS.
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archie
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Post by archie on Mar 5, 2017 17:57:11 GMT
So I have registered, why is there so much on the secondary market? At these rates, they would of been snatched up in no time on SS. If you buy on the sm you are liable for income tax on the accrued interest as well as any subsequent interest. Many will avoid the sm due to their tax position.
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Click on a loan to buy on the SM, click and amount and it will show you the price breakdown.
