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Selling Loans For A Profit At CapitalStackers
I wrote about my interview with CapitalStackers‘* Steve Robson in CapitalStackers: High Property Returns With Lower Risk.
Today I'd like to explain about the potential to make a profit here by buying and then selling loan parts to other lenders, rather than just buying loan parts and waiting until the borrower repays it all.
Cost of selling loans early
Currently, CapitalStackers does not charge to sell loans early.
Making a profit on selling loan parts
You have the opportunity on CapitalStackers of making a profit on the sale.
New lenders taking over your loan parts have more information than you had. The borrower made more interest payments, showing some extra reliability.
But, more than that, CapitalStackers keeps its lenders regularly updated on the status of a project. If a new lender sees that the foundations have been completed, one big risk is gone. Therefore, with lower risks, the new lender will be willing to accept lower interest rates.
As the seller, you can therefore sell your £5,000 loan part for, say, £5,300. The new borrower can still expect to make £300 after receiving interest, and you get £300 too.
Theoretically – once CapitalStackers is offering enough loans – you could then buy and sell loans fast enough that you might boost your profits a little more than if you just take the interest.
Most CapitalStackers lenders are currently holding the loans to the end, so that they get even higher returns through the interest rate.
I think the real capital gains (on any P2P lending website) will occur during extreme times, such as bubbles and busts.
Capital gains tax
Note that if you buy second-hand loan parts, you might have to pay capital gains tax on any gains you make on selling for a profit. You won't have to if you were the original lender, if your overall investment capital gains are below your tax-free threshold, or if you lend through IFISAs or pensions.
Read more: CapitalStackers' Quick Expert Review.
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