This paper concerns a nonlinear analysis of the effects of viscoelasticity on convection in ferroliquids. We consider the Oldroyd model for the constitutive equation of the liquid. The linear stability analysis yields the critical value of the Rayleigh number for the onset of oscillatory convection in Maxwell and Jeffrey ferroliquids. The use of a minimal mode double Fourier series in the nonlinear perturbation equations yields a Khayat–Lorenz model for the ferromagnetic liquid, and that is scaled further to get the classical Lorenz model as a limiting case. The scaled Khayat–Lorenz model thus obtained is solved numerically and the solution is used to compute the time‐dependent Nusselt number, which quantifies the heat transport. The results are analyzed for the dependence of the time‐averaged Nusselt number on different parameters.