Secondary loan market set up by peer to peer company
A New Zealand company has developed a way to help lenders get money out of a loan early if they unexpectedly need access to cash.
Tuesday, July 26th 2022, 1:34PM
by Eric Frykberg
They will be able to sell all or part of their loan to another investor in a secondary market.
The idea is the brainchild of the peer-to-peer lender Zagga.
Zagga director Marcus Morrison said the new scheme move would provide greater flexibility and create the potential for more liquidity for investors.
“Many of our loans are for 12 months or more,” Morrison said.
“But our investors will sometimes have situations where they might require their capital back early and this gives them that opportunity.”
Peer-to-peer lending typically involves loans made from a lender to a borrower, usually on line, with the peer-to-peer company getting a kind of matchmaker’s' fee.
Morrison gave an example of how the secondary market would work.
“Say I have invested $10,000 through the platform for 12 months, but after six months I want to access that money because my child needs something,” he said.
“I could then apply to put some or all of the loan back up on the secondary market for another investor to take over for the remaining term.”
Morrison said any loans placed on the secondary market would have a full credit check behind them.
If a secondary loan was more than 12 months old, it would get a new credit check.
Zagga was launched in 2015. It was initially called LendMe and is active in Australia as well as New Zealand.
More than $130 million has been lent in New Zealand in that time and the company currently does business of $5 million to $7 million each month.
It says its return to investors is currently 8% p.a. net of fees.
To date, Zagga loans have been mainly for residential property purchase or refinancing, along with bridging loans and credit for small commercial property.
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