The beginning of peer-to-peer lending in Lithuania – 2014, the first platform in the market – P2P lending platform SAVY. Since then, this alternative method of lending and borrowing (further – P2P) is rapidly becoming more popular.
The P2P model allows people to lend and borrow money from each other directly, without the help of banks, quick loans, or credit unions, directly with the help of a licensed Peer-to-Peer lending platform operator.
On the P2P lending platform, money can be lent through the primary market, where applications from people who want to borrow are placed, or through the secondary market.
What is the secondary market?
The secondary market is the part of the P2P lending platform in which cash-backed loans are already circulating. Here, it is possible to acquire the claim rights to the borrower published by other persons (investors) registered in the P2P lending platform. If there are those in the primary market who want to invest (lend) and those who want to borrow, then there are those in the secondary market who want to sell their claims and those who want to take them over.
Who needs a secondary market?
The secondary market is special in that it provides loan liquidity through a peer-to-peer lending platform. This means that investors who want to refuse loans for various reasons can publish them on the secondary market, i.e., sell to those who want to take over these loans. This agreement between the investor and the buyer of the loan is based on the fact that one party expects to make a profit and each party bears the risks associated with such sale or purchase. Loans can be sold with a premium (the loan is sold at a higher price, with a margin on the rest of the credit) at a discount (the loan is sold cheaper, with a discount on the rest of the credit) or for the amount of the investment.
What are the benefits of selling a loan on the secondary market?
In the secondary market, the rest of the credit is sold. People sell loans on the secondary market for a variety of reasons. One of them is the unforeseen financial needs and the desire to withdraw the accumulated funds. Loans on the secondary market are sold not only for financial necessity but also for deliberate, strategic reasons, e.g., to sell the investment with a premium and to earn or get rid of non-viable loans that the investor considers to be risky.
When is it worth buying loans on the secondary market?
It happens that people search for the best loans on the secondary market because it has a wide selection of loans, i.e., selection of a wide range of periods, terms, interest, and the remainder of the loan.
What are the benefits of buying on the secondary market? There are both additional risks and additional opportunities to earn. For example, it is possible to purchase already granted loans at a discount, i.e., cheaper than in the primary market or simply to take over the risks, i.e., at a great discount to redeem overdue loans in the hope that the debt will be successfully recovered. For those who avoid risk – the secondary market is a great way to sell loans, where borrowers are late in meeting their obligations, and for those who use a riskier investment strategy – this is a great way to increase their available loan basket, often at a significant discount.
The secondary market is an effective tool for those who want to recruit the amount of investment faster but do not find enough loans in the primary market. Such investors buy investments with a small premium from those who expect to earn from the difference in secondary market transaction premiums or at a discount or for the amount of the investment from those who for one reason or another have decided to waive the granted loans.
SAVY secondary market activity
When choosing a P2P lending platform, it is important to pay attention if the secondary market is active – if trading is not active, it is likely that it may be difficult to sell your loan if needed.
SAVY actively participates in the secondary market, thus providing investors with more liquidity opportunities – buys investments in the secondary market, as well as sells its existing investments. We contribute to a larger supply of your investments and the possibility to recover the funds by selling your existing investments, if necessary.
34% of all investors participate in the SAVY secondary market. A stable, practically unchanging, and investor-friendly trend is that in the secondary market of SAVY 65-70 percent of transactions are sold with a premium, about 10-15 percent of loans are sold at the investment price, and only about 20 percent – at a discount. This means that loans that are already granted are in demand, they can be sold easily, usually without incurring losses, and in most cases can be used to earn extra money from such sales.
We recommend current and future investors to monitor the secondary market and actively participate in trading.