Portfolio Loans

What is a portfolio loan?

A portfolio loan is a loan made by a direct lender. Usually banks make portfolio loans when they want to keep the loans in-house, rather than selling the portfolio loans off or have them underwritten to external lenders. However, recently, the term portfolio loans have been used in wider context. So, nowadays if you come across portfolio loans, check to see what the rules on them are before signing up for them. Each bank has different rules on portfolio loans nowadays.

Advantages of portfolio loans

Sometimes, if you don't qualify for conventional loans, you may qualify for portfolio loans. Banks or financial institutions offering portfolio loans make their own rules so you may be able to convince them to lend you portfolio loans when other loans do not work for you. Sometimes, a portfolio loan will allow you to borrow money without any money down when conventional loans will not.

What kind of loan is a portfolio loan?

Since portfolio loans are unconventional loans, they may not have the guidelines you might expect in a mortgage. The term of the portfolio loan may be shorter than most mortgages. The portfolio loan may also be a hybrid loan. Banks that issue portfolio loans want to keep them as flexible as possible in case they need the money for something else.

Portfolio loan interest rates

The rates on the portfolio loans is often higher than conventional 30 year mortgage rates. The rates on portfolio loans are also not locked in because fixed rates profit the banks that lend the portfolio loans less.