A New Zealand company has developed a way to help lenders get quick cash on a loan if they need access to cash unexpectedly.
Tuesday, July 26, 2022, 1:34 p.m.
by Eric Frykberg
They can sell all or part of their loan to another investor on a secondary market.
The idea is the brainchild of peer-to-peer lender Zagga.
Zagga chief Marcus Morrison said the new plan would provide greater flexibility and create the potential for more liquidity for investors.
“A lot of our loans are for 12 months or longer,” Morrison said.
“But our investors will sometimes have situations where they might need their capital sooner and that gives them that opportunity.”
Peer-to-peer lending generally involves loans made by a lender to a borrower, usually online, with the peer-to-peer company receiving some sort of finder’s fee.
Morrison gave an example of how the secondary market works.
“Let’s say I invested $10,000 in 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 ask to put some or all of the loan back on the secondary market for another investor to take over for the remaining term.”
Morrison said any loan placed in the secondary market would have a full credit check behind it.
If a secondary loan was older than 12 months, 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.
Over $130 million has been lent to New Zealand at this time and the company is currently doing business of $5-7 million per month.
It says its return to investors is currently 8% per year net of fees.
To date, Zagga loans have primarily been for the purchase or refinance of residential property, as well as bridge loans and credit for small commercial properties.
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