What is a Loan Services?
April 27, 2019
A loan service company
A loan service company is a business unit that handles loans either on its own behalf or to another company. People with outstanding loans submit their payments to this company and it handles the charging of interest, fees, insurance payments, and other costs associated with the loan. Loan service is a very large industry worldwide and includes a mix of public and private companies with different areas of specialty.
When a company comes out of a loan, it has the opportunity to hold the loan or sell it to another party. In either case, the owner of the loan may decide to service it in-house if it has staff to do so, or to outsource loan servicing to another company. The loan service company specializes in loan management. Employees all have extensive training in managing debtors and loans, and the company offers full service, including answering questions from borrowers, foreclosing assets, if the debtor does not keep up with payments, and terminating the lien at the end of a loan.
Borrowers send payments to the loan service company and may be able to use online and telephone payment systems beyond the post. The service company calculates and collects interest. It can also handle other loan expenses, depending on the structure of the loan, such as collecting property taxes for escrow accounts or collecting private mortgage insurance payments from the borrower. It charges a fee for these services, and typically companies will receive a discount when opening contracts on large packages of loans.
When the problems with the loan arise, the loan services handle them. This includes delayed payments, requests for Frankenstein or indulgence, and so on. The company is working to solve the problem if possible and to take the collection actions if this is not an option. It may have internal collection services or may choose to outsource this to another party.
Borrowers and loan service companies both have rights and responsibilities under the law, although the precise laws may vary depending on the location. Usually, loan servicers need to notify borrowers of changes such as the sale of loans and the changes to the terms. They also need to provide contact information and statements upon request so that borrowers can determine if their accounts are in good standing. There is also an obligation to maintain privacy by protecting confidential information about borrowers, such as CPR numbers. On the other hand, borrowers need to keep abreast of payments, provide up-to-date contact information, and contact the loan service provider if they expect repayment problems.