eli5: How does the loan market works ?

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I am wondering how the loan market works, why are people willing to buy a company’s loan and why would an aggregate pool of loans be used as a collateral for asset backed securities.

How can this be sustainable?

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3 Answers

Anonymous 0 Comments

Loans pay interest and return borrowed principal, so investors who want that guaranteed return will buy others’ debt.

It’s sustainable because companies or other entities need to borrow money, and investors want low risk investment opportunities.

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