Why does a lender have to sell a loan?

jarad · Apprentice Joined: 23 Apr 2005 Posts: 1

This loan is the type of loan you are given in order to buy the house. Interest-only loan is often called bullet loan, because you are immediately paying only a part, namely the interest, and not the principal for a certain period of time. Total amount is payable when the term ends. Failing to do so will lead into a lot of trouble, penalties and raising rates, so be careful. However, as much as there is a risk for you, so is there for a lender. If you become a bad debtor, sometimes the only way out is to sell a loan in order to get out of his troubles, and you get a chance to get out of yours.

mitchael · Apprentice Joined: 31 Aug 2006 Posts: 1

Interest-only loans are pretty good deals for you, as they give you a little break immediately after buying a house, and allow you to pay only interest for some time, which gives you a window large enough to manage your finances the right way. However, one of the problems, at least when it comes to such loans for the house, is that the house equity will not rise, which makes re-financing very difficult if you fall into debt and start getting late. Having a loan sold then helps both you, but especially the lender.

lisle · Apprentice Joined: 10 Sep 2005 Posts: 2

Aside from the general use of an interest-loan as a type of mortgage, there are other means of having a similar type of payment calendar. Namely, bonds, notes, and credit at all can be of the same type. It has very specific feat only in the sense that it requires so called balloon type of payment, which means a large part as its terms finishes. That, in turn, means that you have to be very careful about your assets and your financial prospects or your loan could be sold.

Why does a lender have to sell a loan?

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