DEFINITION
Loan Servicing
Loan servicing refers to the processes and tasks performed from after a loan has been issued up until it has been completely paid off. These processes include collecting and processing loan payments, managing escrow accounts, handling late payments, offering customer service, and so on.
Synonyms
Loan administration, loan management
Acronyms
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Synonyms
Loan administration, loan management, debt servicing
Acronyms
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Examples
An individual takes out a mortgage loan in order to buy a new house. The bank determines that they do not present a high risk and issue the loan. The loan servicing thereafter encompasses sending monthly billing statements, applying the procured funds, as well as the taxes and insurances associated with the loan, providing customer support and issuing reminders if payments are late, until the loan is completely paid off 10 years later.
FAQ
What does a loan servicer do?
A loan servicer performs the day-to-day operations related to paying off a loan. For example, processing monthly payments, managing escrow accounts, sending account statements, and assisting the customer.
What is the difference between loan origination and loan servicing?
Loan servicing encompasses the period after the loan has been issued and up until it has been paid off while loan origination also covers the initial application and underwriting steps.
What is an escrow account in loan servicing?
An escrow account is a separate account that is managed by the loan servicer and holds funds collected from the borrower for property taxes and the homeowner’s insurance.
Related Terms
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