If you’re investing for passive income, knowing how much interest you could earn is only part of the picture.
For anyone looking to earn passive income, understanding when those payments arrive, how much you'll receive after tax, and when you can access your original investment can help you plan your finances.
How SCP's interest payments work
At Southern Cross Partners (SCP), investors can choose individual property-backed loans through our Investor Portal. Most investments pay interest monthly into the investor's nominated bank account, after applicable tax deductions.
Some loans offer compounding interest instead. With these investments, interest is calculated daily and, after Resident Withholding Tax (RWT) is deducted each month, the remaining interest is added to the investment balance. This means investors can earn interest on both their original investment and the interest they've already accumulated. The accumulated funds are paid when the borrower repays the loan.
Both arrangements earn interest, although the timing of payments differs. Investors receiving monthly interest can use that income as it arrives, while those choosing compounding receive their accumulated earnings when the loan is repaid.
What about your original investment?
Receiving monthly interest doesn't mean the money you've invested is available to withdraw each month.
SCP investment terms are generally held for the life of the selected loan. Unlike a term deposit each opportunity has an anticipated maturity date rather than a guaranteed repayment date, although borrowers may repay early or seek an extension, which SCP assesses.
If investors need their funds before repayment, they can request to on-sell their investment through SCP's Resale Market. These requests are subject to approval, and a sale depends on another investor purchasing the investment at exactly the same terms.
As with any investment, there are risks. If a borrower is unable to meet their obligations, interest payments may be delayed and investors may not recover the full amount invested, even though SCP's loans are secured by registered first mortgages and conservative LVR’s could mitigate this occurring.
When a loan is repaid
When a borrower repays their loan, the investor's funds are credited to their SCP On Call account. From there, funds can be reinvested in another available opportunity or transferred to a nominated bank account.
Whether you're investing for regular income or allowing earnings to accumulate, consider not just the potential return but how and when you will receive it, alongside your financial goals, timeframe and risk appetite, including when you may need access to your funds. We recommend speaking with an independent financial adviser before making investment decisions.
To learn more about how SCP's property-backed investments work, visit our investment information page or read more about the risks involved.
Southern Cross Partners is licensed to provide peer-to-peer lending services under the Financial Markets Conduct Act 2013. This article is general in nature and does not take into account any particular person's objectives or circumstances. We recommend you speak with a financial adviser before making any investment decisions.
