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The #loans we take can be bought & sold. Did you know this? 
https://abs.twimg.com/emoji/v2/... draggable="false" alt="🤔" title="Denkendes Gesicht" aria-label="Emoji: Denkendes Gesicht">
Let& #39;s talk about what does it exactly mean to #buy or #sell a loan, why financial institutions do this, what& #39;s #debtfunds, and why invest in them!
Pull up a chair and let& #39;s get into the weeds.https://abs.twimg.com/emoji/v2/... draggable="false" alt="😬" title="Grimasse schneidendes Gesicht" aria-label="Emoji: Grimasse schneidendes Gesicht">
Let& #39;s talk about what does it exactly mean to #buy or #sell a loan, why financial institutions do this, what& #39;s #debtfunds, and why invest in them!
Pull up a chair and let& #39;s get into the weeds.
Let& #39;s talk about what does it exactly mean to #buy or #sell a loan, why financial institutions do this, what& #39;s #debtfunds, and why invest in them! Pull up a chair and let& #39;s get into the weeds. https://abs.twimg.com/emoji/v2/... draggable="false" alt="😬" title="Grimasse schneidendes Gesicht" aria-label="Emoji: Grimasse schneidendes Gesicht">" title="The #loans we take can be bought & sold. Did you know this? https://abs.twimg.com/emoji/v2/... draggable="false" alt="🤔" title="Denkendes Gesicht" aria-label="Emoji: Denkendes Gesicht">Let& #39;s talk about what does it exactly mean to #buy or #sell a loan, why financial institutions do this, what& #39;s #debtfunds, and why invest in them! Pull up a chair and let& #39;s get into the weeds. https://abs.twimg.com/emoji/v2/... draggable="false" alt="😬" title="Grimasse schneidendes Gesicht" aria-label="Emoji: Grimasse schneidendes Gesicht">" class="img-responsive" style="max-width:100%;"/>
Table of contents:
https://abs.twimg.com/emoji/v2/... draggable="false" alt="▪️" title="Schwarzes kleines Quadrat" aria-label="Emoji: Schwarzes kleines Quadrat">What does it mean to buy/sell a #loan & how does it work?
https://abs.twimg.com/emoji/v2/... draggable="false" alt="▪️" title="Schwarzes kleines Quadrat" aria-label="Emoji: Schwarzes kleines Quadrat">What are #debt_securities or debt #bonds?
https://abs.twimg.com/emoji/v2/... draggable="false" alt="▪️" title="Schwarzes kleines Quadrat" aria-label="Emoji: Schwarzes kleines Quadrat">Who should #invest in #debtfunds & why?
Hope this will give you a high level understanding of all these things.https://abs.twimg.com/emoji/v2/... draggable="false" alt="🤞" title="Gekreuzte Finger" aria-label="Emoji: Gekreuzte Finger"> Let& #39;s get rolling! https://abs.twimg.com/emoji/v2/... draggable="false" alt="🚀" title="Rakete" aria-label="Emoji: Rakete">
Hope this will give you a high level understanding of all these things.
1/ What does it mean to buy/sell a loan?https://abs.twimg.com/emoji/v2/... draggable="false" alt="🤔" title="Denkendes Gesicht" aria-label="Emoji: Denkendes Gesicht">
When people need capital, they take loans, in return, they pay #interset to the bank or the institution. But what happens when the #lending institution needs capital? They obviously can& #39;t demand us to pay off the loan right away, right?
When people need capital, they take loans, in return, they pay #interset to the bank or the institution. But what happens when the #lending institution needs capital? They obviously can& #39;t demand us to pay off the loan right away, right?
2/ It& #39;s a common practice for lending institutions to #sell loans to another institution. Yes, you heard it right. Loans have interests which makes them #financial assets known as #debt_securities which can be bought/sold. Let& #39;s take an example https://abs.twimg.com/emoji/v2/... draggable="false" alt="👇" title="Rückhand Zeigefinger nach unten" aria-label="Emoji: Rückhand Zeigefinger nach unten">
3/ I take a loan of $10,000. That loan is a liability to me, but it& #39;s an asset to the lending institution. So when the institution needs capital instantly, they sell it to another institution for a fair price (often less). Now I have to make the repayments to the new institution.
4/ It’s entirely legal for them to do it. But, they provide a warning that my loan will be serviced by a diff company. When we obtain a loan, we agree, usually in writing, to repay it. That agreement has a #contract that the right to receive the payments, can be #bought & #sold.
5/ But in most cases, #institutions don& #39;t just sell loans 1 or 2 at a time, they bundle a bunch of #loans together with similar risk levels which is often known as #bonds & these bonds are sold to investors who make #profit from the #interest payments. https://abs.twimg.com/emoji/v2/... draggable="false" alt="💰" title="Geldsack" aria-label="Emoji: Geldsack">
6/ Every debt security has a #credit rating that helps #investors understand the possibility of default or the risks involved. High quality #debt security offers predictable & #fixed return while the other offers an opportunity to earn #higher returns. https://abs.twimg.com/emoji/v2/... draggable="false" alt="✌️" title="Siegeshand" aria-label="Emoji: Siegeshand">
7/ Generally, debt funds are less risky than #equity funds as it invests in fixed-interest generating #securities which implies a stable return. While equity funds are highly volatile & depends on #stock market. So #investors with lower risk tolerance find debt funds more ideal.
Hope this gives some new #insights! https://abs.twimg.com/emoji/v2/... draggable="false" alt="🤞" title="Gekreuzte Finger" aria-label="Emoji: Gekreuzte Finger"> However, I& #39;m totally new to all these things so please let me know if there& #39;s anything I missed out on.
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Have a nice day!https://abs.twimg.com/emoji/v2/... draggable="false" alt="❤️" title="Rotes Herz" aria-label="Emoji: Rotes Herz">
Retweet to spread knowledge & follow me @SouravInsights for more threads about #crypto, #DeFi, #finance and #DEX!
Have a nice day!
