A loan in which two or more lenders share in providing loan funds to a borrower. An example is a loan participation between a local bank and a correspondent bank in which the loan request exceeds the local bankâs legal lending limit. Generally, one of the participating lenders originates, services, and documents the loan.
a banks agreement to share a portion of an existing loan with another lender
(a) The buying of portions of outstanding loans by investors, who then participate on a pro rata basis in collecting interest and principal payments. (b) the sharing by two or more lenders in the ownership of a loan or package of loans.
A cash purchase of a percentage of an outstanding loan from the originating lender, usually with risk shared pro rata.