What Happens to Your Personal Loan when the Lender Changes Ownership?

If your personal loan lender changes ownership, you may experience delays in your loan funds. This only occurs for borrowers who receive their loans though a credit card or installment payments. Borrowers who received their loan in one principal sum will see a change in the time and place where they owe payments in the short-run. Otherwise, all other terms and conditions of a loan should remain unchanged.

Why Loans Change Ownership

Loans, even though they represent a short-term loss of funds for a lender, are actually assets on a financial statement. They promise a given future revenue stream that may be an attractive acquisition to a separate lender or investor. Loans change ownership when a new lender successfully negotiates the purchase of a loan from your existing lender. The new lender can then gain revenue off the loan in the future.

When Loans Change Ownership

Loans change ownership in two primary scenarios. The first scenario occurs when a bank or lender fails as a result of bad debt. Banks and lenders take on debt in order to extend loans. When these loans and their other investments do not pay off, the lenders may actually fall into a bankruptcy situation. A new lender can purchase the assets in order for the existing lender to settle debts in bankruptcy. The FDIC handles this process to assure all loans are responsibly sold to lenders in good standing.

A second primary scenario occurs when one lender merges with or purchases another as a strategic business decision. This is more common during most business cycles. In this case, the two lenders will negotiate a fee for the total portfolio of loans a lender has. Most voluntary sales of loans that occur in this fashion include whole loan portfolios. Some individual investors may purchase only one or two loans, though, in order to turn a profit. Individual loans are typically only purchased if they are high risk, delinquent or nearing default. An investor may offer the existing lender the opportunity to "unload" the high risk loan. The new lender takes the high risk loan because of the potentially high rewards. 

What it Means for the Borrower

Most borrowers will not notice a large difference when their loan is sold. The loan will typically enter a grace period where no payments are due for a certain amount of time. Even though the payments are not due, they will be due in full immediately upon cessation of this grace period, so you should save the funds accordingly. The new lender will contact you with payment instructions once the grace period has ended. All loan terms should remain the same as the new owner purchased the loan as is.

Borrowers who are receiving current distributions on their loans may see those distributions cease temporarily. For example, personal loans are sometimes distributed through credit cards. Since these cards will not be attached to an active account during the sale process, they will not work during that period of time. A new card will be issued in order for the loan to resume at its pre-sale terms. 

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