We are independent & ad-supported. We may earn a commission for purchases made through our links.

Advertiser Disclosure

Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.

How We Make Money

We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently from our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What Is a Secondary Debt Market?

Malcolm Tatum
Updated May 17, 2024
Our promise to you
WiseGEEK is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At WiseGEEK, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

The secondary debt market is a term that is used to describe a market that is based on the sales of debt instruments as a means of generating some sort of income. Within this market, speculators purchase existing debt from owners for a percentage of the face value of that debt. The idea is that as the new owner, the speculator can eventually collect that face value and be able to offset both the purchase price and the resources expended in attempting to collect that outstanding debt.

One of the more common examples of a secondary debt market is a company that buys delinquent and defaulted debt instruments. This may include balances remaining on defaulted loans or even on credit card or other types of revolving credit accounts. Typically, the buyers will focus on defaulted accounts that the owner has been unable to collect, and is considering either writing off the balances as bad debt or taking some sort of legal action. The buyers offer an alternative by agreeing to purchase the debt for a percentage of the total amount due, effectively providing the original owner with at least some compensation while also making it possible to avoid additional legal and other expenses associated with that debt.

A secondary debt market may focus on credit card accounts that have been closed to further use due to non-payment, or even focus on various types of unsecured loan arrangements that have gone into default. It is not unusual for the buyer to implement their own collection procedure that may include everything from attempts to arrange a liberal repayment plan with the debtor to taking legal action to collect the debt by means of seizing assets of the debtor or garnishing the debtor’s wages.

In terms of profitability, participants in a secondary debt market normally purchase past due debts at extremely low rates. Making a profit off the purchased debt is typically easier to manage, even if some of the purchased debt is ultimately not collected. Even if the buyer purchases ten different debt accounts from the same company, it may take only collection on one of those ten to break even and a partial collection on a second one to clear a profit.

As with any type of market activity, participation in a secondary debt market does present some risk. Failure to qualify debt before purchase can lead to assuming a significant amount of debt that will never be recovered, regardless of the strategies employed. In addition, laws and regulations related to debt collection in general may limit the range of strategies that can be employed, a factor that further reduces the potential of collecting on past-due debt. Since it may take an extended period of time to realize any type of return, it is important to have a solid financial base before choosing to buy on a secondary debt market.

WiseGEEK is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum , Writer
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGEEK, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.

Discussion Comments

Malcolm Tatum

Malcolm Tatum


Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
WiseGEEK, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGEEK, in your inbox

Our latest articles, guides, and more, delivered daily.