Some lenders and holders service their own loans. Many lenders and holders hire companies to do the servicing for them. These companies are called loan servicers or servicing agencies. When a lender or holder uses a loan servicer, the borrower sends repayment checks, deferment forms, requests for forbearance and other correspondence to the loan servicer, which represents the holder. An organization that buys loans is called a secondary market.
Secondary markets buy loans from original lenders and from other holders of loans.
By purchasing a loan, thus taking ownership of the promissory note, the secondary market becomes the holder of that loan. Holder The holder of a loan is any organization that owns your promissory notes. Other Terms Capitalize Adding interest that has accrued onto the principal balance. Subsequent interest then begins to accrue on the new principal. Compound Interest Interest earned on principal plus accumulated interest that was earned earlier.