how an indirect loan works secondary market 
loans not originated directly by the lender that holds them can be considered indirect loans when a lender sells a loan they are no longer responsible for it or receive any interest income from it instead everything is transferred to a new owner who assumes the burden of administering the loan and collects the repayments read any indirect loan contract very carefully if the dealer cannot sell the loan the buyer signed to a lender it may have the right to cancel the contract within a specified period of time and require the buyer to return the car the buyer is then entitled to get back the down payment and trade in or the value of the trade in if a trade in was involved in this situation the dealer may try to pressure a car buyer to sign another contract on less favorable terms but the buyer is not required to sign it indirect loan examplesauto dealerships are one of the most common businesses involved with indirect loans in fact some authorities even call indirect loans a type of car loan many consumers use dealer financed loans for the convenience of being able to apply on premises and to easily compare offers on the downside obtaining an auto loan directly from a bank or credit union on his own gives the buyer more leverage to negotiate as well as the freedom to shop around among other lenders and the interest rates might be better but if a buyer has a spotty credit history or low credit score an indirect loan may be their best option loans actively trade on the secondary markets as well specifically a pool of loans that have been combined rather than individual loans often a bank or credit union sells its consumer loans or mortgages doing so allows lenders to acquire new capital reduce administrative costs and manage their level of risk in the home lending market for example the federal national mortgage association fannie mae and federal home loan mortgage corp freddie mac support the secondary trading of mortgages through their loan programs these two government sponsored enterprises buy home backed loans from lenders package them and then re sell them in order to facilitate liquidity and increased availability of funds across the lending market 