Investment Order
When a marketplace application is converted to a loan contract, the investment booking made by investors is converted to investment order (IO) on the contract. You can create investment orders manually or using the Sell Investment Order API. In case an investor withdraws investment or sells it to another investor, then that IO is updated with an end date and a status of Sold or Withdrawn. A new IO is created if a new investment happens in the loan. Else, the lender may decide to pay back a negotiated amount to the investor, based on the principal and any accrued charges. In such case, the returns from the borrower for the exited investor are apportioned to the lender. If the investors are paid through the weighted average of certificate rates, if one of the investor withdraws, the payout reverts to following the default calculation.
The Buying Price of the IO indicates the price at which the investor bought or sold the IO. This can be different from the investment amount of the IOIO, as the investor may buy it on discount or at a premium. For example, an IO of 1000 may be bought at 1200. If the investor sells a portion of the IO, say 50%, then the buying price is also reduced by that proportion, that is, 50%, irrespective of the amount at which the IO is sold.
Suppose there are two investors both with initial available funds of $10,000 who have invested in two different loans in the primary market. Investor 1 has invested 3000 and Investor 2 has invested 5000. The below table captures the information after the investments have been made. Furthermore, both investors have bought the investments at 5% discount.
Investor 1 | Investor 2 | |
Total Buying Price | 2850 | 4750 |
Total Invested Amount | 3000 | 5000 |
Total Invested Principal Remaining | 3000 | 5000 |
Available Funds | =10000 – 2850 = 7150 | =10000 – 4750 = 5250 |
Step 2
Suppose 10% of the Principal is received after the first month. In addition, Investor 1 receives an interest of $30 and investor 2 receives $50. Now the updated field values will be as follows:
Investor 1 | Investor 2 | |
Total Buying Price | 2850 | 4750 |
Total Invested Amount | 3000 | 5000 |
Total Invested Principal Remaining | =3000 – 10%(3000) = 2700 | =5000 – 10%(5000) = 4500 |
Available Funds | =7150 + 300 + 30 = 7480 | = 5250 + 500 + 50 = 5800 |
Step 3
Now investor 1 sells 50% of his remaining portfolio to Investor 2 for 1300. The updated fields will be as follows:
Investor 1 | Investor 2 | |
Total Buying Price | = 2850 – 50% (2850) = 1425 | =4750 + 1300 = 5050 |
Total Invested Amount | =3000 -50%(3000) = 1500 | =5000 +1500 = 6500 |
Total Invested Principal Remaining | =2700 – 50%(2700) 1350 | 4500 + 1350 = 5850 |
Available Funds | 7480 + 1300 = 7780 | 5800 – 1300 = 4500 |
The details of all the IOs of an investor can be viewed from the investor's Account page. Each time an investor is paid, an investor loan transaction (ILT) is created.
Transaction codes
The table given below provides details of the transaction codes in an investor loan transaction and the time at which each one is created:
Transaction codes | Time of creation |
|---|---|
| Active | After an Investment order is created and activated. |
| Payment approval | When the Investor Payout job runs, and the investment order is active. |
| De-Active | When the Investor Payout job runs after a loan pay-off. |
| Certificate rate change | On changing the certificate rate using the investment order maintenance page. |
| Charge off | After making a loan write-off. |
| Service rate change | On changing the rate at which service fee is charged. |
| Payment release | |
| Payment reversed | When the Investor Payout Reversal job runs and the investor payment is reversed. |
| Principal reinvested | If the principal component of the ILT is reinvested. |
| Interest reinvested | If the interest component of the ILT is reinvested. |
| Principal and interest reinvested | If the principal and interest components of the ILT are reinvested. |
Closing the Investment Order
You can close an IO once the loan is matured or paid off. Loan payoff refers to complete repayment of a loan. The status of the loan is changed to Closed- Obligations met.
When the Investor Payout job is run on a closed loan, the system deactivates the IO and subsequently, the transaction code on the investor loan transaction changes to De-active. This same status is displayed if you click the related investor loan ID and scroll to the bottom of the page to the Transaction code.