The secondary market is an option offered by some crowdlending platforms to be able to divest and offer greater liquidity to investors. Let’s see what it is and how it works.
what is the secondary market?
When you are investing in P2P loans, you usually cannot dispose of the money invested until the loan expires (or the repurchase guarantee is applied, if applicable). Although some platforms such as Bondora, with its Go&Grow product, or Mintos, with its predefined strategies, offer the possibility of withdrawing the money at almost any time, in most cases you will have to wait until the end of the loan to be able to withdraw your money.
In order for investors to be able to disinvest at any time and withdraw their money, some platforms have a secondary market.
So if you want to get rid of some of your loans, you can put them up for sale and other investors can buy them from you. You get your money back, when another investor buys it from you. Depending on the platform, you can put the loan up for sale for the actual price of the loan or you have the option to set a sale price with a premium or discount. Where this option exists, if you need to sell the loan urgently, you can put it up for sale at a lower (discounted) price to make it more attractive to buyers and sell it sooner.
On the other hand, if you are an investor who wants to add more loans to your investment portfolio, you can look for interesting loans in the secondary market. You might find loans at a discount or loans for which you have to pay a little more than their real price, but which have a very high return.
On some platforms it is possible to set up a self-investment strategy in the secondary market, on others you will have to invest manually.
Some crowdlending platforms apply fees when the loan is sold and/or bought on the secondary market, usually a small percentage of the selling price. On others you will be able to use this option without any fees
Advantages of investing in a secondary market platform
The big advantage is that you can sell your loans if you need to recover the money invested. It provides the possibility of liquidity. So if the type of investment you are looking for in crowdlending is short term this is a feature you will probably want to have in the P2P platform you decide to invest in.
