In this paper, the impact of load dynamics on the oscillatory stability of power systems is studied. The well-known composite load model is linearized to yield third order transfer functions for active and reactive power dynamics of loads. It is shown that the third order model exhibits a recovery response that is accompanied by damped oscillations. In studying the impact of loads’ transfer function parameters on the small signal stability of power systems, a resonance is observed between the load and the electromechanical modes of the system that significantly alters the electromechanical modes’ damping. The role of the active and reactive power dynamics, as well as the operating condition of the system on the impact from a dynamic load on electromechanical modes are investigated. For preliminary insights, a single machine infinite bus system (SMIB) is used initially to avoid the unnecessary complexities associated with large grids. The general conclusions drawn from the SMIB studies are then confirmed on a 14 generator model of the Australian grid.