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An Interesting Lending Industry Option for Investors Seeking More Portfolio Diversification

Investors have many ways today of diversifying their portfolios to make them more resilient or resistant to market downturns. An effectively diversified basket of investments can preserve gains through difficult times and even produce more when others are struggling.

What it often takes to achieve such results is to establish positions that will perform well when generalized economic hardships occur. While the stock valuations of most types of lenders could be expected to fall in the midst of a recession, for example, there are others which could easily stand a better chance. The stocks of lending specialists like Consumer Portfolio Services, which focus on serving consumers with less than perfect credit histories, can make excellent targets for investors interested in diversification.

Many Consumers Have Been Denied Conventional Car Loans

For many years, most car buyers paid for their purchases by taking out loans issued by conventional banks, credit unions, and other traditional sources of financing. In many cases, even the regulatory requirements faced by such lending institutions mandated that relatively high standards be applied to those seeking financing.

The most recent recession made this fact and related ones clear in ways that left many millions of would-be vehicle buyers without access to this type of financing. Turned away at local banks, these shoppers increasingly found themselves being welcomed by another type of lender entirely.

A Style of Lending That Shines in Tough Times and Beyond

In most cases, this more accessible type of financing is arranged for by car dealers who have entered into agreements with particular lenders behind the scenes. These indirect automotive lenders promise to buy loan contracts that meet pre-established standards and have been carefully vetted by their partnering dealers at the point of sale.

This style of financing and sales has become an increasingly popular option nationwide. It is also one that has demonstrated its resilience in the face of challenging economic conditions, with the top lenders in this space having performed well even during the depths of the last recession. As a result, it can easily make sense for an investor interested in diversifying a portfolio to look into the financial details of such a lender.