Welcome to December’s Secondary Market statistics blog post. Recently, we talked about the most common methods used to purchase current, overdue and defaulted loans and whether these transactions were made at a premium, discount or par value.

Below, we are going to do the same based on the statistics received in December.

Current loans

API Manual Portfolio Manager Total
Discount €14,957.09 €10,875.80 €3,766.99 €29,599.88
Par €89,168.06 €58,071.51 €576,002.58 €723,242.15
Premium €40,160.10 €85,533.45 €0 €125,693.55
Total €144,285.25 €154,480.76 €579,769.57 €878,535.58

In line with previous months, the Portfolio Manager still leads the way in purchasing current loans at a par and discount value. Last month, the API came in second however this has now been overtaken by the manual option. The total amount of current loans purchased on the Secondary Market decreased only very slightly this month by €1,946.

You will notice that the Portfolio Manager has not invested in any loans with a premium. As a reminder, the Portfolio Manager only purchases loans that are current and priced at either a discount or par value.

Overdue loans

API Manual Portfolio Manager Total
Discount €2,227.93 €12,770.59 €0 €14,998.52
Par €368.72 €3,586.43 €0 €3,955.15
Premium €195.77 €2,543.64 €0 €2,739.41
Total €2,792.42 €18,909.66 €0 €21,693.08

In December, the number of overdue loans purchased on the Secondary Market decreased quite significantly by over 41%. Over 87% of these purchases were completed manually, nearly 7 times as many as via the API feature.

Defaulted loans

API Manual Portfolio Manager Total
Discount €1,353.15 €37,068.02 €0 €38,421.17
Par €0.80 €5,716.20 €0 €5,717.00
Premium €0.63 €13,612.71 €0 €13,613.34
Total €1,354.58 €56,396.93 €0 €57,751.51

While the total amount of purchases of defaulted loans has increased by over €7,000, the total amount completed manually has risen by 15.2%. In October, €164 of defaulted loans were purchased at a premium, in November this figure was much higher at €1,061, in December the number multiplied by nearly 13 at €13,612. A unique strategy used by some investors is to purchase defaulted loans with a significant discount with the plan to reap the rewards once the collection and recovery process begins to generate a cash flow.

It’s important to remember that buying loans at a premium can have a negative impact on your overall net return.

Bringing it all together

API Manual Portfolio Manager Total
Total Secondary
Market Purchases
€148,432.25 €229,779.75 €579,769.57 €957,981.57

Good to know

Selling your loans can result in a loss of the original principal, as the secondary market typically does not provide a high enough premium for current loans to compensate for the non-performing part of the portfolio. Therefore, we advise to proceed with caution and not to try and sell everything at once if you see a percentage of your portfolio in default. It is likely that you will quickly sell the performing part of your portfolio and be left with the loans in recovery, significantly damaging your expected return.

The speed of the sales process depends on the market demand. In general, current loans are more liquid and will usually be sold within a day if sold at par value or a slight premium. Delinquent loans may take more time or the sale can be unsuccessful. As soon as another investor has purchased your loan, you will receive the funds directly to your Bondora account.

If you’re still unsure how to sell your loans, you should always get in touch on investor@bondora.com and have a chat with one of our experienced Investor Relations Associates who will walk you through it step by step.