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Accrued interest in the secondary market

Accrued interest in the secondary market

Accrued interest is the amount of interest earning by a seller during that month. For example, lets say you own £1,000 of a loan earning 1% per month, you would due £10 each month. If you chose to sell your loan half way through the month to another lender you would still be entitled to £5 in interest; this is ‘accrued interest’.

If you buy a loan on the secondary market, you also pay the accrued interest to the seller. In the case of an amortising loan, you also pay over any accrued capital. In return you will receive the full repayment at the next repayment date. If you sell a loan part, you receive the accrued interest up to that date from the buyer, but will not receive any payment on the next interest date.

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