What Are the Parties Involved in the Loan Servicing Process?

There are four main parties involved in the loan servicing process: the borrower, the lender, the loan holder, and the servicer.

Initially, there is a contractual relationship between you (the borrower) and the financial institution who lent you money (the lender). Sometimes, the lender will sell your loan to a third-party investor (the loan holder), who becomes your new creditor and is the person or institution to whom you have to make further payments to repay the loan. Now, since managing the loan on a day-to-day basis requires significant time and effort, the lender or loan holder may outsource this task to a loan servicer, who administers your loan on the lender or loan holder's behalf for a certain fee.

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The roles of lender, loan holder, and servicer may all be filled by the same financial institution.