selling loans to secondary market

selling loans to secondary market

Buy and sell your investments

The secondary market is a way for investors to buy and sell parts of a loan that has been activated. This provides:

  • An exit route for anyone needing to remove funds in an emergency
  • A way to rapidly build up a diverse holding of multiple loans
  • A way to enable funds to start earning interest rapidly
  • A way to reduce / increase a holding in a specific loan
  • An alternative to bidding on live loans
  • All investors have the option of buying and selling on the secondary market
  • No investor can be forced to buy or sell on the secondary market
  • The market is supply/demand driven - if you think the price is too high - don't buy
  • There are no charges from FundingSecure for buying / selling

The price is set by the seller and is calculated as follows:

Price = investment amount, plus or minus premium or discount, plus nominal accrued interest

The seller decides how much premium or discount they wish to apply but is limited to a range of between -1% and +1%.

The premium or discount is only applied to the investment amount

An amount equivalent to the nominal accrued interest is added to the price as the interest for the entire loan period is paid to whoever holds the investment when the loan completes. (NOTE: accrued interest is calculated on the number of days expired and will change at midnight to reflect the additional day)

The process of offering an investment for sale consists of choosing an investment to sell, deciding how much to sell and whether to offer at a discount, at par, or at a premium and then posting the offer. If successful the sale will appear in your list of activity and the investment (or part of the investment) will be removed from your active investment listing.

The process of buying an investment on the secondary market consists of selecting the investment, deciding how much to buy and committing to buy. The purchase will appear in your list of activities and the investment will be added to your active investment listing.

CAUTION: When buying a loan part you are purchasing the original loan part. In line with HMRC rules you will therefore be responsible for any tax liability on all interest paid when the loan completes. As this can result inВ an overall loss, especially if the loan is repaid early, you should bear this in mind when purchasing on the secondary market.

The effective return is calculated as follows:

Expected Return at Term = ER;В В В Purchase price on SM = PP;В В В Days left DL

Buy ВЈ100 loan earning base rate of 12% pa, with 90 days left and 1% discount

Expected return = ВЈ106

Purchase Price = ВЈ102

(Gross figures before any possible taxation)

How Secondary Market transactions are reflected in your account

If you purchase an investment on the secondary market, your available balance is reduced by the purchase price, whilst your investment account is credited with the investment value. Therefore, if you purchase at a premium, the total value of funds held will be reduced by the premium. Conversely, if you purchase at a discount, your total value of funds will increase by the discount.В

Incentive bonuses offerred at the time of funding are designed to encourage larger investors to bid sooner, to complete the funding process in line with the borrower's requirements. Therefore ONLY the original bidder is entitled to the incentive bonus, it is NOT transferred with a secondary market sale.

  • Incentive bonuses are not included in the secondary market sale or the CNV calculation
  • Incentive bonuses will only be paid to the original purchaser at the original rate on loan completion
  • Incentive bonuses will be paid on remaining balance at time of loan completion

Original purchase of ВЈ50,000 with base interest of 12% plus incentive bonus of 3%. ВЈ45,000 later sold on secondary market.

Original purchaser receives base interest of 12% plus incentive bonus of 3% on remaining ВЈ5,000

Secondary market purchaser receives base interest of 12% on ВЈ45,000

When offered, cashbacks are paid at the time the loan goes live. Therefore they play no part in subsequent purchases and sales on the secondary market.

Please note, we are unable to provide any specific information about tax. The wording below is for indicative purposes only, and does not constitute tax advice. If you are in any doubt about your tax position you should speak to your accountant or an adviser at an HMRC enquiry centre.В This information is only relevant to UK tax resident individuals holding loans directly as legal and beneficial owner.

Unlike other platforms we do not collect interest from the borrower at the time the loan is issued. This means that the "accrued9quot; interest is an estimated value and has not yet been paid by the borrower. Although HMRC require us to report payments of interest paid to individuals we are not required to report any figures for accrued interest. More information can be found here.

Seller - The funds received by the seller of a loan part on the secondary market are considered a capital transfer, plus a premium paid as an incentive, in payment for the original capital lent. They are therefore not reported to HMRC and are not usually liable for income tax.

Buyer - The buyer pays for the capital of the loan part, together with any premium. When the loan is repaid the buyer will be responsible for all income tax liability on the full interest earned. FundingSecure are required by HMRC to report this interest paid to UK individuals at the end of each tax year.

If you buy or sell a loan part on the secondary market within your IFISA any gain / loss will not affect your tax liability.

Secondary market transactions are considered to be purchases / sales of the original loan which is a “simple debt”. As such they are not usually liable for capital gains tax. In the event of a capital loss due to a default the loss is calculated against the original capital value, not including any premium / discount paid through the secondary market. The current capital gains annual exempt allowance for an individual is ВЈ11,100.

NOTE: If you buy and then resell the same loan part on the secondary market it may no longer be considered as a “simple debt” and any gains may be liable for capital gains tax. Further information is available here.

  • Only activated loans can be offered for sale
  • No investment can be offered for sale during the funding process
  • No investment can be offered for sale within 30 days of the expected end date
  • All or part of an investment can be offered for sale
  • An investment can be offered for sale at a premium +/- 1%
  • The premium applies to the capital only
  • All accrued interest transfers to the buyer
  • No fees are charged for secondary market transactions
  • FundingSecure can disable the secondary market on any investment if deemed appropriate

Registering online is quick and easy. To access our members' section, you don't need to enter any bank details or deposit any money.

Selling loans on the Secondary Market

Selling your loans can result in a loss of the original principal, as the secondary market typically does not provide a high enough premium for current loans to compensate for the non-performing part of the portfolio. Therefore, we advise to proceed with caution and not to try and sell everything at once if you see a percentage of your portfolio in default. It is likely that you will quickly sell the performing part of your portfolio and be left with the loans in recovery, significantly damaging your expected return.

Why can selling my loans have a negative impact on my net return?

When selling your loans on the secondary market , it is highly likely that this will result in reduced returns or even worse, losses. Why? Because you are losing out on the monthly interest you would have received until maturity on each loan, not to mention if you sold a loan at a discount. To avoid this and to maximize your returns when liquidating your portfolio, why not pause your reinvestments and hold the loans until maturity, taking cash out as the loans are paid back to you on a monthly basis.

Selling loans to secondary market

No more fee for selling loans on the secondary market

Exciting news! Starting from today, November 1, 2017, we have removed the 1% fee for selling loans on the secondary market of the Mintos marketplace. This means from now on, there are absolutely no fees for investing through Mintos.

“A secondary market with no fee will greatly benefit our investors. We expect the secondary market to become even more liquid now. This is especially good news for investors who want to pursue a long-term investment strategy and invest in loans with longer maturity. In the case investors will need the liquidity before the loan matures, they will be able to sell their investment with no extra fee added,” says Martins Sulte, CEO and co-founder of Mintos.

Selling loans to secondary market

This section of FinAid provides information about secondary markets. Secondary markets ensure the liquidity of the Federal Family Education Loan Program (FFELP) by buying student loans from education lenders. This provides education lenders with fresh capital they can use to originate new student loans. As a result, secondary markets are among the largest holders of student loans.

Selling loans is a common practice among lenders, so the bank a borrower sends his or her payments to may change during the life of the loan. Typically a loan will be sold when it enters repayment. Many small banks effectively act as brokers for the secondary markets, contracting to sell their student loans when they enter repayment. The terms and conditions of a student loan do not change when it is sold to a secondary market.

Trade Associations for Secondary Markets

The Education Finance Council (EFC) is the national trade association for state student loan secondary markets.

National Secondary Markets

Sallie Mae is the largest secondary market for student loans. They also originate Stafford, PLUS, Consolidation and private education loans. The following companies are owned or affiliated with Sallie Mae: Academic Management Services (AMS), Education Debt Services Inc., Education First Marketing LLC, Education One Group Inc., General Revenue Corporation, Nellie Mae, Pioneer Credit Recovery Inc., HEMAR Insurance Corp. of America, SLM Financial Corporation, SLM Funding Corp., Southwest Student Services Corporation (SSSC), Student Assistance Corp., Student Loan Funding Resources LLC (SLF), TrueCareers Inc., Student Loan Finance Association (SLFA), Student Loan Marketing Association, Upromise, USA Group, Wired Scholar, Sallie Mae Education Trust, Sallie Mae Inc., and Sallie Mae Servicing LP. For more information, call 1-888-2-SALLIE (272-5543) or write to 11600 Sallie Mae Drive, Reston, VA 20193. For information about PLUS Loans call 1-800-891-1410. For information about Consolidation Loans call 1-800-448-3533. For information about the Signature Student Loans call 1-800-695-3317. Related web sites include: Parent Answer (PLUS Loans), College Answer (formerly Wired Scholar), Signature Student Loans, and OpenNet Laureate.

Brazos Higher Education Service Corporation. The Brazos Group includes a secondary market, in addition to a servicer, guarantor and lender. Brazos Group lenders include 1st Student Financial, Academic Finance Corporation (AFC), Educational Funding Services, Inc. (EFSI), and Acapita Student Finance Corporation. For more information, call 1-800-375-9208 or 1-800-453-0841, fax 1-888-367-9185, write to PO Box 14445, Austin, TX 78761 or PO Box 1308, Waco, TX 76703, or send email to [email protected].

Education Funding Resources, LLC is the secondary market subsidiary of Education Lending Group, Inc. For more information, call 1-858-617-6080, fax 1-858-617-6079, write to Education Lending Group, Inc., 12760 High Bluff Drive, Suite 210, San Diego, CA 92130-20180, or send email to [email protected]. Related web sites include Student Loan Xpress and Consolidation Assistance Program.

GCO Education Loan Funding Corporation (GCO-ELF) is a member of the Greystone family of companies, a private investment firm. They acquired the student loan assets and infrastructure of GMAC Education Loan Funding Corporation in September 2004. Their focus is on the acquisition and securitization of FFELP Stafford, PLUS and consolidation loan assets. They do not originate FFELP loans, but do offer their own private student loans under the Educated Borrower brand. For more information, call 1-800-334-4480.

National Education Loan Network (NELNET) is a national secondary market, lender and servicer. Their servicer subsidiaries include EFS, Inc., EFS Finance Company, National Higher Education Loan Program Inc., and UNIPAC Service Corporation. Other NELNET companies include Nelnet, Inc., National Education Loan Network, Inc., Nelnet Guarantee Services, Inc., Charter Account Systems, EDULINX Canada Corporation (sold May 2007 to Resolve), Firstmark Services LLC, Foresite Solutions Inc., 5280 Solutions Inc., infiNET Integrated Solutions, Inc., Nelnet Marketing Solutions, Inc., Shockley Financial Corp., American Card Services, Inc., Premiere Credit of North America LLC, Class Credit, Inc., CUNet, CollegeandUniversity.net, InTuition, Inc., Student Marketing Group (SMG), National Honor Roll, LLC, CollEDGE Loans and LoanSTAR Funding Group, GuaranTec LLP, FACTS Management Company, EMT Corporation, Idaho Financial Associates, Inc., Peterson's, MELMAC, Inc., National Higher Education Loan Program, Inc. Nelnet Mentor LLC, and SLAAA Acquisition Corporation. NELNET acquired the student loan portfolio of CHELA in 2005. NELNET previously acquired NEBHELP, the Nebraska secondary market, and MELMAC, the Maine secondary market. Lenders who sell their student loans to NELNET typically offer repayment incentives that include a 1% reduction in origination fee, a 3.33% reduction of the principal loan balance after making 30 consecutive on-time monthly payments, and a 0.25% interest rate reduction for automatic direct debit of monthly payments. For new loans, call 1-877-804-3603 or 1-886-866-7372 or send email to [email protected]. For consolidation loans, call 1-866-4CONSOL (1-866-426-6765) or send email to [email protected]. For customer service call 1-888-486-4722. For more information, call 1-402-458-2370, fax 1-402-458-2399, or write to 121 South 13th Street, Suite 400, Lincoln, NE 68508. Related web sites include SuperLoan, NELNET Academic Loan, NELNET Consolidation, and Nelnet Investors.

Regional Secondary Markets

Southwest Student Services Corporation (SSSC) is the designated state secondary market for Arizona and Florida. Its affiliates include the Arizona Educational Loan Marketing Corporation (AELMAC) and Florida Educational Loan Marketing Corporation (FELMAC). In addition to providing liquidity to education lenders in Florida and Arizona, they also offer Stafford, PLUS, Consolidation and private education loans. Lenders who sell their student loans to SSSC typically offer repayment incentives that include a 0% origination fee, a 0% default fee, and a 0.25% interest rate reduction for automatic direct debit of monthly payments. Their lender codes are 830630 (Arizona) and 831245 (Florida). SSSC was acquired by Sallie Mae in 2004. For more information in Florida, call 1-888-740-1074 or 1-305-740-0100, fax 1-305-740-0999, write to 11140 SW 88th Street, Suite 200, Miami, FL 33176, or send email to [email protected]. For more information in Arizona, call 1-800-367-2369, fax 1-480-461-6589, write to PO Box 41150, Mesa, AZ 85274, or send email to [email protected].

State Secondary Markets

ALL Student Loan is California's largest nonprofit student loan lender. They offer Stafford, Parent PLUS and Grad PLUS loans. Benefits offered are a 0.25% interest rate reduction for auto-debit payments and 0% federal default fee at select guarantors. Their lender code is 833752 (California schools). For more information, call 1-888-271-9721, fax 1-888-271-7239, write to ALL Student Loan, 6701 Center Drive West, Suite 500, Los Angeles, CA 90045 or send email to [email protected]. ALL Student Loan also operates a number of programs designed to increase college access and completion, including early awareness, financial aid literacy and default prevention.

Arkansas Student Loan Authority (ASLA) is the state secondary market for Arkansas. They offer Stafford, PLUS, Consolidation and private education loans. Their lender code is 826509. For more information, call 1-800-443-6030 or write to 101 East Capitol Avenue, Suite 401, Little Rock, AR 72201.

Chela Education Financing [alternate link], also known as Chela Financial Resources Inc. or the California Higher Education Loan Authority, is a state secondary market for California. They offer Stafford, PLUS, Consolidation and private education loans. Lenders who sell their student loans to Chela typically offer repayment incentives that include origination fee reductions of up to 3%, a 1.5% discount for borrowers with loan balances of $7,500 or more at repayment, and a 0.25% interest rate reduction for automatic direct debit of monthly payments. Customer Service can be reached at 1-866-35-CHELA (24352). For more information, call 1-866-34-CHELA (24352) or 1-415-283-2800, fax 1-888-54-CHELA (24352) or 1-415-283-2888, write to 388 Market Street, 12th Floor, San Francisco, CA 94111, or send email to [email protected].

College Invest, formerly known as Colorado Student Obligation Bond Authority (CSOBA), is a secondary market for Colorado. They are a division of the Colorado Department of Higher Education. They offer Stafford and PLUS education loans. Lenders who sell their loans to College Invest typically offer repayment incentives that include origination fee reductions of up to 3%, a 0.25% interest rate reduction for automatic direct debit of monthly payments, a 1% interest rate reduction after 24 months of on-time payments and an additional 1% interest rate reduction after the next 24 months of on-time payments. Their lender code is 827866AA. For more information, call 1-800-448-2424, fax 1-303-296-4811, write to 1560 Broadway, Suite 1700, Denver, CO 80202, or send email to [email protected].

Edfinancial Services, formerly known as Education Services of America, Inc. (EdAmerica) and as Educational Funding of the South Inc. (Edsouth), is a secondary market located in Tennessee. They were previously known as the Volunteer State Student Funding Corporation. They offer Stafford, PLUS, Consolidation and private education loans. Lenders who sell their student loans to EdSouth typically offer repayment incentives that include a 1% reduction in origination fees, and a 4% rebate after 33 months of on-time monthly payments with automatic (direct debit or online). Their lender code is 831453. For customer service, call 1-800-337-6884 or 1-865-342-5500 or send email to [email protected]. For more information, call 1-800-337-1009, fax 1-877-337-8439 or 1-865-218-1013, or write to PO Box 31549, Knoxville, TN 37930-1549 or 123 Center Park Drive, Knoxville, TN 37922, or send email to [email protected]. Related web sites include EdFinancial Services, edsouth Secondary Market, and Edconsolidation Student Loan Consolidation.

Education Services Foundation (ESF) is a state secondary market for Mississippi. It incorporates the Mississippi Higher Education Assistance Corporation (MHEAC). They provide servicing for lenders who sell their loans to MHEAC at repayment. For more information, call 1-800-986-4322 or 1-601-321-5555, fax 1-601-321-5599, or write to 2600 Lakeland Terrace, Jackson, MS 39216 or PO Box 5008, Jackson, MS 39296-5008.

Finance Authority of Maine (FAME) is a secondary market and guarantee agency for student loans in Maine. For more information, call 1-800-228-3734 or 1-207-623-3263, fax 1-207-623-0095, TTY 1-207-626-2717, write to 5 Community Drive, PO Box 949, Augusta, ME 04332-0949, or send email to [email protected].

Illinois Designated Account Purchase Program (IDAPP) is the state secondary market for Illinois. IDAPP is also a loan originator and loan servicer. They are a division of the Illinois Student Assistance Commission. Lenders who sell their loans to IDAPP typically offer repayment incentives that include a 1% origination fee rebate at repayment, a 0.25% interest rate reduction for automatic direct debit of monthly payments, a 1% interest rate reduction after 24 months of on-time payments and an additional 1% interest rate reduction after the next 24 months of on-time payments. For more information, call 1-847-948-8620 or 1-800-961-IDAP (4327) for new loans or 1-800-366-5755 for consolidation loans or 1-800-366-5755 for customer service, fax 1-847-831-8625, write to PO Box 707, Deerfield, IL 60015 or send email to [email protected].

Indiana Secondary Market for Education Loans, Inc. (ISM) is the state secondary market for Indiana. ISM offers federal Stafford, Parent PLUS and Graduate PLUS loans. ISM does not use automated telephone services during regular business hours, so most calls are answered by a customer service representative in typically less than 10 seconds. Stafford and PLUS borrowers can receive a 0.25% interest rate reduction benefit for automatic direct debit of monthly payments. For more information, call 1-888-ISM-2002 (1-888-476-2002) or 1-317-715-9000, fax 1-317-715-9001, write to 251 N. Illinois Street, Suite 400, Indianapolis, IN 46204, or send email to [email protected].

Iowa Student Loan Liquidity Corporation (ISSLC) is the state secondary market for Iowa. They offer Stafford and private education loans through participating lenders. Lenders who sell their student loans to ISSLC typically offer repayment incentives that include 0% origination fees and a 2.5% interest rate reduction after 48 months of on-time payments. For more information, call 1-800-243-7552 or 1-515-243-5626, fax 1-515-243-5472, or write to Ashford I Bldg., 6805 Vista Drive, W. Des Moines, IA 50266-9307.

Kentucky Higher Education Student Loan Corporation, also known as The Student Loan People, is the state secondary market for Kentucky. They offer Stafford, PLUS, Consolidation and private education loans. Lenders who sell their student loans to the Student Loan People typically offer repayment incentives that include a 0% default fee and 0% origination fee. Their lender code is 826688. For more information, call 1-800-416-5176 or write to P.O. Box 24328, Louisville, KY 40224-0328. Related web sites include Kentucky Higher Education Assistance Authority.

LoanSTAR Funding Group Inc., formerly known as the Greater East Texas Servicing Corporation and the Greater East Texas Higher Education Authority, is a secondary market for Texas. For more information, call 1-800-829-4599, fax 1-979-776-8978, write to PO Box 4940, Bryan, TX 77805, or send email to [email protected]. Related web sites include www.edcred.com and elite.loanstar.com.

Louisiana Education Loan Authority (LELA) is a state secondary market for Louisiana. LELA offers Stafford and PLUS education loans. Lenders who sell their education loans to LELA typically offer repayment incentives that include 0% origination fees, 0% default fees, a 0.25% interest rate reduction for automatic direct debit of monthly payments, and a 3% interest rate reduction after 36 months of on-time payments. For more information, call 1-800-228-4755 or 1-225-923-0020, fax 1-225-923-0021, write to 2237 South Acadian Thruway, Suite 650, Baton Rouge, LA 70808 or send email to [email protected]. Related web sites include Louisiana Public Facilities Authority.

Michigan State Secondary Market (SSM), established 1990, is the state secondary market for Michigan. It operates as a program of the Michigan Higher Education Student Loan Authority (MHESLA). Lenders who sell their education loans to MHESLA typically offer repayment incentives that include 0% origination fees and a 0% interest rate after 36 months of on-time monthly payments. MHESLA also offers a private education loan called the MI-LOAN Program. For more information, call 1-888-MHESLA-1 (1-888-643-7521) or 1-517-373-3662, TDD 1-800-649-3777, write to Michigan Higher Education, Student Loan Authority, PO Box 30051, Lansing, MI 48909, or send email to [email protected].

Missouri Higher Education Loan Authority (MOHELA) is the state secondary market for Missouri and neighboring states. They also offer Stafford, PLUS, Consolidation and private education loans. Lenders who sell their loans to MOHELA typically offer repayment incentives that include a 2.5% interest rate reduction for automatic direct debit of monthly payments. For more information, call 1-800-666-4352 or 1-636-532-0600, fax 1-888-387-3530 or 1-636-532-0610, or write to 633 Spirit Drive, Chesterfield, MO 63005-1243. Related web sites include Michigan Student Aid.

Montana Higher Education Student Assistance Corporation (MHESAC) is a secondary market for FFELP student loans made by Montana lenders and other participating lenders. MHESAC also offers Stafford and PLUS loans directly to Montanans. MHESAC's loans are serviced by Student Assistance Foundation of Montana (SAF). For more information, call 1-800-852-2761 x6657 or 1-406-495-7800, fax 1-406-495-7880, write to PO Box 5209, Helena MT 59604-5209, or send email to [email protected].

New Hampshire Higher Education Loan Corporation (NHHELCO) is a state secondary market for New Hampshire. They offer Stafford, PLUS, Consolidation and private education loans. For more information, call 1-800-525-2577 or 1-603-225-6612, fax 1-603-224-2581, write to 4 Barrell Court, PO Box 877, Concord, NH 03302-0877, or send email to [email protected]. Related web sites include Granite State Management & Resources (GSM&R) and NHHEAF Network.

New Jersey Higher Education Student Assistance Authority (HESAA), established 1959, is the state secondary market and student loan guarantee agency for New Jersey. They offer Stafford, PLUS and Consolidation education loans, as well as the NJCLASS (New Jersey College Loans to Assist State Students) alternative education loan. HESAA typically waives the 1% guarantee fee for its borrowers. For more information, call 1-800-792-8670, write to PO Box 540, Trenton, NJ 08625.

North Texas Higher Education Authority (NTHEA) is a secondary market for Texas lending institutions. They offer Stafford and PLUS education loans through participating lenders and provide a 0.25% interest rate reduction for automatic direct debit of monthly payments as a repayment incentive. For more information, call 1-800-366-4372 or 1-817-265-9158 or write to 1250 East Copeland Road, Suite 200, Arlington, TX 76011-4921.

Oklahoma Student Loan Authority (OSLA) [alternate link] is a secondary market, loan servicer and education lender. They offer Stafford, PLUS, Consolidation and private education loans. Lenders who sell their student loans to OSLA typically offer repayment incentives that include a 1% rebate of loan principal after entering repayment and making the first three monthly payments on-time, a 1.5% interest rate reduction after making the first 12 monthly payments on-time, and a 0.33% interest rate reduction for automatic direct debit of monthly payments. For more information, call 1-800-456-6752 or 1-405-556-9200, fax 1-800-261-7529, TDD 1-405-556-9230, write to PO Box 18145, Oklahoma City, OK 73154-0145 or 525 Central Park Drive, Building I, Suite 600, Oklahoma City, OK 73105, or send email to [email protected] or [email protected]. For help in Spanish, call 1-877-556-9275 or 1-405-556-9275.

Panhandle-Plains Higher Education Authority Inc. (PPHEA) is a secondary market for student loans in West Texas. Their affiliated servicer, the Panhandle-Plains Student Loan Center (PPSLC) services student loans owned by Central Texas Higher Education Authority and the North Texas Higher Education Authority in addition to loans held by PPHEA. For more information, call 1-800-736-5727 or 1-806-324-4100, fax 1-806-655-7765, or write to 1403 23rd Street, PO Box 839, Canyon TX 79015.

Pennsylvania Higher Education Assistance Agency (PHEAA) is the state secondary market and guarantor in Pennsylvania. For more information, call 1-800-343-1809 or 1-717-720-3100, or write to 1200 N 7th Street, Harrisburg PA 17102-1444.

Reunion Student Loan Finance Corporation, located in South Dakota, is a third party servicer for student loans. For more information, call 1-800-592-1270, fax 1-605-622-4464, write to 125 S First St, Aberdeen, SD 57401-4107, or send email to [email protected]. Related web sites include iHELP Loan.

Rhode Island Student Loan Authority (RISLA) is the state secondary market for Rhode Island. For more information, call 1-800-758-7562 or 1-401-468-1760, fax 1-401-468-1745, TDD 1-401-468-1750, write to 560 Jefferson Blvd., Suite 200, Warwick, RI 02886-1371, or send email to [email protected].

SMS Hawaii, the student loan secondary market for Hawaii, is an affiliate of USA Funds. Their lender code is 832776. For more information, call 1-888-272-5543 or 1-808-593-2262, fax 1-808-593-8268, or write to 1314 South King Street, Suite 861, Honolulu, HI 96814.

South Carolina Student Loan Corporation (SCSLC), also known as the South Carolina State Education Assistance Authority, is a secondary market and guarantor for student loans in South Carolina. SCSLC was established in 1974. They offer Stafford, PLUS, Consolidation and private education loans. For more information, call 1-800-347-2752.

South Texas Higher Education Authority Inc. (STHEA) is a state secondary market for South Texas. STHEA contracts with the Council for South Texas Economic Progress (COSTEP) to service their loans. For more information, call 1-800-949-6371 or 1-956-682-6371, fax 1-956-971-3319 or 1-956-971-3321, or write to 2540 W. Trenton Road, Edinburg, TX 78539.

Student Loan Finance Association (SLFA) is the designated secondary market for student loans in Washington state, and also operates as a secondary market in Oregon and Idaho. Sallie Mae acquired the secondary market and related businesses of SLFA in 2004. For more information, call 1-877-330-4455, write to 190 Queen Anne Avenue North, Suite 400, Seattle, WA 98109, or send email to [email protected].

Student Loan Funding [alternate link] is a secondary market for student loans in Ohio. They are a wholly-owned subsidiary of Sallie Mae. They offer Stafford, PLUS, Consolidation and private education loans. Their lender code is 831455. For more information, call 1-877-477-7537, fax 1-513-763-4340, or write to One West Fourth Street, Suite 1000, Cincinnati, OH 45202-3699.

Explaining the secondary market

Posted on 21 April 2017

Back in 2010, we introduced the ability for investors to access all or some of their money before the loan terms they’re invested in are completed. This is done by selling loans to other investors. For Classic and Plus investments, there’s a 1% fee for this service.

In order to sell your loans, there must be other investors to buy them. This is where the secondary market comes in: it’s here that we match existing loans being sold to other investors.

We match your money to loans on two different markets:

  • The primary market is where we match your money to new loans recently approved. This year, to date over 48,000 people have had their investments matched to loans on the primary market.
  • The secondary market consists of investors selling their loans. These loans are partially repaid, and the buyer will receive all remaining repayments on them. This year, to date over 36,000 people have had their investments matched to loans on the secondary market.

In both markets, the matching process is automated. There’s no manual effort on your part; no picking and choosing of loans, or deciding who to sell to. So if you’re buying loans, your portfolio’s projected return continues to be at or near the target return, and if you’re selling loans, you receive the correct amount back in proceeds.

Why is a secondary market a good thing for investors?

The secondary market gives investors a simple way to access a lump sum of capital before your loans are fully repaid (provided there are other investors to buy your loans). For investors buying loans, it is another pool of loans to be matched to, and helps to keep your money earning.

The loans you buy will always follow your investment choices. For example: if you’re investing in Zopa Access or Zopa Classic, you won’t buy D or E loans on the secondary market.

No, sometimes it’s not possible to sell all your loans. This could be because:

  • There is a pending payment on the loan – in these instances, we wait until the seller has been repaid before the loan can be sold.
  • The loan is currently in arrears – it’s not fair for the buyer to take on a loan which is not currently paying back.
  • The loan has defaulted.

Loans with payments pending can be sold as soon as the payment clears, and loans in arrears with Safeguard coverage can be sold after the fund has purchased the bad debt. As of June 2017, Plus and Core loans which have previously been in arrears can be sold : however be aware that capital you receive for selling these types of loans may be less than you’d receive for loans that haven’t ever been in arrears . Defaulted loans in all products are ineligible for sale.

If after 20 days we’re unable to sell your loans, we stop the sale process and let you know we’ve been unable to sell a certain amount of them.

Are there fees to use the secondary market?

In Classic and Plus, there’s a 1% administration fee for selling loans. This fee is waived in Access (for which investors earn a lower return).

If you’re selling a loan that’s worth less than a new investor could expect on a similar loan in today’s primary market, you may have to compensate the investor buying the loan. For example:

  • You’re selling a loan with a 4% interest rate, and the primary market rate of a similar loan has increased to 5%. In buying this loan, the investor would be worse off for not buying a new loan from the primary market.
  • To make it fair, you (the selling investor) compensate the buyer. We manage this through an automated process which calculates the compensation amount by comparing the value of your loan to a similar one available on the primary market. We then pass the money directly to the buying investor.

How can I see if my loans came from the primary or secondary market?

In your loan book, which is available to download any time, there are two columns which will show you which market you purchased the loan in: the date each loan started, and the date you acquired each loan. By comparing these, you’ll see which loans came to you from the primary market, and which were partially repaid before you acquired them.

What’s next for the secondary market?

We’re always looking to improve our services. Watch this space for exciting news around how we’re making the secondary market even better.

Andrew Lawson is Chief Product Officer at Zopa

This post has been updated from the original.

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