As the interest rate that applies to an outgoing lender’s early access loan may differ to that of a replacement funder’s facilitating loan, the value that an outgoing lender may receive for transferring their early access loan may be less than the current face value of that loan. For example, where the interest rate of a replacement funder’s lending order is greater than the interest rate on the relevant early access loan, the early access loan will be discounted to ensure that the economic return expected by the replacement funder (given the rate specified in their lending order) is met while keeping payments under the early access loan the same.
By way of example, if an outgoing lender has a $1,000 interest in a loan originally funded in the 3 Year lending market at a lending rate of 8% p.a. and the prevailing lending orders from replacement funders (and thus, the rate at which the facilitating loan will be funded) has increased to 10% p.a., the value the outgoing lender would receive in respect of the early access loan to be acquired by the Early Access Facilitating Partner would be discounted (based on the repayment schedule of the underlying borrower) to provide the replacement funder an equivalent economic return of 10% p.a.
Where an outgoing lender receives less than the face value of their loan following an early access transfer, they may be able to recognise the reduction in value of their loan interests as a tax or capital loss.