A loan sale is a sale, often by a bank, under contract of all or part of the cash stream from a specific loan, thereby removing the loan from the bank's balance sheet.
Types of Loan Sale:
1. Participation Loans
2. Assignments
3. Loan Strip
1) Participation Loans:
a loan that is shared
by
a group of banks that join to make a loan too
big
for any one of them alone.
2) Assignments:
A sale of loan by bank of rights against the
borrower and the benefits of the
loan, to the assignee bank.
3) Loan Strip:
Loan Strips are short-dated
pieces of a
longer-term loan and often mature
in a few days or weeks. The buyer of
a strip is entitled
to a fraction of
the expected income
from
a loan.