Indirect Loan

Indirect loans are loans that have an intermediary or third party...basically, a middleman. If you have an indirect loan, it’s kind of a loan of a loan; you’re taking out a loan from, say, a car dealership, which took out a loan from the bank (kind of...it’s more of a dealership network than a single dealership).

The more middlemen there are, the more people there are to pay. However, indirect loans are options for people who can’t get financing the direct-loan way, because they look too risky for banks to take on. Banks will let third parties though...like dealerships...take on that additional risk if they want to. That risk is reflected in the higher interest rates the borrower will be paying on the loan.

It’s not uncommon for indirect loans to be pooled together and sold to others, who then assume the risk of the loan and collect the payments.