What is the purchase of a loan?

Sometimes it is referred to as the purchase of a consumer loan loan, the purchase of loans is a type of financial transaction in which loans issued by financial institutions are sold, sometimes with a discount, new owners. Several loans are sometimes connected to a single package and sold as safety to investors. The aim is for the borrowing agent to obtain sufficient compensation from the purchase to cover the expenditure and a small amount of profit, while the buyer or investor eventually gains more return because the loans are paid according to the original conditions. The purchase of loans also converts the risk of loans to the new owner, which causes losses if the debtors associated with the loans purchased should fail for some reason.

The idea of ​​buying a loan is very common in many business environments. Mortgages, car loans and even credit card debt are sometimes united by purchase and offered to investors as a means of miningfrom revenues obtained from these financial debt instruments in the coming years. For investors who participate in the purchase of a loan, it is often the idea of ​​creating ongoing revenue flows, which eventually cover the total amount paid for volumes, and at the same time provide income on the interest that the debtor penetrates with the principal. Since loans are often purchased for a slight discount on the actual remaining balance payable at the time of purchase, it only helps to increase the revenues that the investor eventually realizes from the company.

The purchase of a loan is also beneficial for an institution that originally provided a loan. This is because the creditor does not have to wait for the loan to be repaid according to the conditions to get back full investment. The purchase of the loan is often at a price that is slightly below the nominal value of the loan and the expected amount of interest is due at the time of the purchase. The creditor has the advantage of accepting a flat -rate amount invested in the loan earlier, often makes a small amount back to the actual costs associated with the loan itselfAnd it is free to use these funds to subscribe to additional loans that generate additional incomes. The best of all is that the creditor is no longer endangered by the default loans that are sold to investors.

In many countries, it is not unusual for financial institutions to use a model of borrowing with private and commercial mortgages, car loans and other types of lending. For the debtors themselves, the sale may mean little in the method of changing, in addition to the need to make a monthly repayment payment to another entity with another remittance of the address. The actual loan conditions usually do not change, which means that the debtor still pays the same interest rate, has the same repayment plan and is subject to the same rights and obligations were originally downloaded.