What is a loan sale?

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A loan sale is a transaction carried out by the holder of a loan in which that loan is offered for sale to interested parties. Often, a bank or similar type of institution will use this approach to generate immediate cash for the institution. As part of the transaction, the seller relinquishes all or part of the cash flow generated by the loan to the new owner, a move that often makes it possible for the selling institution to mark the loan as paid and remove any details about the loan from its owner. monthly balance.

In some countries, the sale of a loan is conducted by a government-sponsored financial entity when a bank fails. All loans still held by the failed bank are sold to other banks or institutions as part of the failed bank’s debt settlement process. When this occurs, borrowers typically do not see any disruptions to loan service. What will likely change is the remittance address for making loan payments, as well as online access to the account. In most cases, borrowers are notified as soon as the loan sale is completed and the loan is taken over by a new owner, and new instructions are provided for bidding on the loan payment.

The sale of the loan typically does not require borrowers to be notified in advance that a sale is pending. In most nations, participation in the sale is limited to qualified institutions only. This means that institutions invited to participate must be compensated by the entity carrying out the sale. It is not uncommon for one of the qualifications for participation to be agreeing to continue to service the loans that are purchased, and not redeem the loans early.

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While in the past the sale of a loan was usually carried out in a physical location with representatives of the potential buyers who participated directly in the sale, the Internet has made it possible to carry out the sales in a virtual environment. Banks can choose to sell loans through their own websites or use a partner to manage loan sale details. In either scenario, qualified potential buyers can obtain login credentials, review loans currently offered for sale, and initiate a purchase when they are ready to do so. With the online version of a loan sale, you can initiate a transfer of funds to the original owner, complete the transaction, and have control of the loan within 24 hours.

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