What are the cost & future scheduled payments on the Secondary Market?
The cost is the seller's quote request you have to pay when you decide to purchase a loan. It consists of the outstanding principal the borrower has to pay, inclusive of the premium or discount applied. Premiums and discounts are determined solely by the seller.
In general, premiums are added when the loan is being repaid on time by a reliable borrower and is expected to continue to generate a good return for the owner of the investment share. On the other hand, loans may be offered at a discount if there have been irregular payments made by the borrower.
By checking out the percentage in the brackets behind the cost, you can see whether a loan is offered with premium or discount. If it’s a positive number, then a premium has been applied, and when you see a negative number, it’s offered with a discount. If 0% is estimated, the loan will be sold at par. To buy the loan, you then pay exactly the amount of principal the borrower has to pay back in the individual note.
Before buying any loans, you should check whether the future payments are higher than the price request. Otherwise, you will pay more than you can get back (including interest). Although it makes no sense for the buyer, such offers are occasionally being made. Therefore, the gap between the cost and future payments is already a very important indicator of whether the offer can be a good deal for you.
Afterward, you should get a more detailed picture of the loan, for example, by looking more closely at the overdue principal and the accrued interest and late charges.