All about the secondary credit market
What is secondary market?
Secondary market is the possibility for investors to buy and / or sell the already-confirmed investments in credits. Only the investments owned by the investor under the ownership rights can be sold in the secondary market. This means that the consumer credit in which the investor has invested, is already financed and the credit is already paid out to the credit receiver. The investments might be sold for a higher price than they were bought for, namely with a premium (+X%), or for a lower one, namely with a discount (-X%). Either the premium or the discount is already reflected in the selling price of the investment.
Premium – a margin applied by the investment seller, calculating from the residual part of the credit. Applied when the investment is sold at a more expensive price than was bought.
Discount – a discount applied by the seller, calculating from the residual part of the credit. Applied when the investment is sold at a cheaper price than was bought.
An intermediary fee of 1% is applied while both selling, as well as buying, the investments. The fee is calculated based on the selling price of the investment.
Potential reasons for buying:
/ Possibility to buy the already-confirmed investments at a cheaper price than in the primary market (when buying with a discount).
/ Primary market does not offer the credits which are attractive for a particular investor.
/ Buying default credits with a big discount, expecting for a successful recovery.
/ Possibility to see the solvency history of a particular investment.
/ Possibility to buy an investment for less than EUR 10.
Potential reasons for selling:
/ Possibility to earn while selling an investment with a premium.
/ Aim for a quick cash withdrawal.
/ Wish to dismiss particular investment which seems unattractive to the investor.
How to sell an investment in the secondary market?
You can sell the investment in the “My investments” section. After clicking “Sell investments”, you can tick the investments which you are willing to sell. After doing so, click “Continue”. Then, you can enter either a premium or a discount for each investment, and see the potential outcome of selling the investment.
You can cancel the announcement any time, while the investment is still not bought by other investor. The announcement in the secondary market is valid for 30 days. If it is not sold within these 30 days, the announcement is automatically cancelled. Therefore, if still willing to sell the investment, the announcement should be re-uploaded.
If NEO Finance initiates termination of consumer credit agreement, the announcement is automatically cancelled.
How to buy an investment in the secondary market?
The secondary market can be found in the “Invest” section. In the list of the investments being sold, you can see all information related to them: investment date, creditworthiness rating, remaining share of the loan to be repaid, annual interest rate, maturity, remaining receivable amount, premium or discount and the selling price.
IMPORTANT! In some cases, selling price might exceed the remaining receivable amount, therefore, these two amounts should be compared. In order to buy the investment in the secondary market, click the button “Buy” and sign the agreement.
What taxes are applicable when buying and / or selling investments in the secondary market?
When buying and selling investments in the secondary market, brokerage fee of 1% is applied. It is calculated with respect to the investment selling price.
Example no. 1: Buying the investment.
a) Investment is sold with a premium (2%)
10.74 (residual part of the investment) + (10.74 * 2.00/100 (premium)) = 10.95 + 0.11 (intermediary fee 1%) = 11.06 (selling price)
b) Investment sold with a discount (-2.00%)
24.38 (residual part of the investment)+ (24.38 * (-2.00/100) (discount)) = 23.89 + 0.24 (intermediary fee 1%) = 24.13 (selling price)
Earnings of the buyer = Residual amount receivable - Selling price
Example no. 2: Selling the investment.
a) Investment is put in the secondary market with a premium (2%)
8.20 (residual part of the loan) + (8.20*2.00/100 (premium)) = 8.36 (selling price)
8.20*2.00/100 (premium) + 0.30 (interest received) - 0.08 (1% intermediary fee) = 0.38 (calculated profit)
b) Investment is put in the secondary market with a discount (-2%)
8.20 (residual part of the loan) + (8.20*(-2.00)/100 (discount)) = 8.04 (selling price)
(8.20*(-2.00)/100) (discount) + 0.30 (interest received) - 0.08 (1% intermediary fee) = 0.06 (calculated profit)
Earnings of the seller = Premium / Discount + Interest - Intermediary fee
NEO Finance is also selling its investments in the secondary market.
This way, the company strives to present the investors with more investment opportunities, especially considering the demand for shorter-term credits.
Crucial to know:
/ Investments to be sold are the ones the schedule of which finishes in no more than 36 months.
/ Investments to be sold will be the non-overdue ones.
/ Investments will be sold with no premium.
/ In the market, such investments will be distinguished in grey.
With regards to any questions, please send your inquiry on [email protected], or call +37068700300.