For all of us either with loans or contemplating a loan, we all have one thing in common. We would rather not have a loan and, if there was a way to either minimize the amount of fees and interest we paid or, structure the loans to our advantage, we would want to know How!
For most people, a loan is a necessity in life whether it be to buy a home, start a business, provide cash flow or business assets, renovate a property or a host of other reasons. While this may be the case, there ARE ways to avoid lenders dictating the terms of the transaction and put the borrower back in control of the security offered for the transaction and the commercial terms attached to the loan.
The following tips apply in particular to business owners who:
- Borrow money and pledge their residential property (in part or full to the lender) yet pay business or commercial interest rates.
- Borrow money but do not want the lender to tie up all their assets and have complete control in either a default situation or when they want to refinance to another lender.
Determining the Security for your loan
Most lenders, want to hold as much security as possible (usually property assets) for each borrowing. They also like to give themselves as many ‘outs’ as possible in a forced sale situation. Keeping this in mind, the lender will usually try to ‘cross collateralize’ or ‘ring fence’ all your property assets. Sometimes while this is in their best interests, it is not in your best interests depending on your goals and your options to achieve the best rate, terms and conditions on your total lending portfolio.
The best option on your loans may be to spread the security and loans amongst lenders or to have a series of ‘stand alone’ loans. There are a range of options available and consultation with an ‘All About You’ finance manager will help you to determine the best option.
Want Business Loans at Home Loan Interest Rates?
Lenders are always trying to maximise their profit from each customer and loan transaction. Many lenders have achieved excellent returns for their various institutions by determining the interest rate based on the reason for the loan.
If you are applying to the lender for a loan for business purposes, they will often apply a business or commercial lending rate to your scenario. While these loans are for business use, the loans are secured by residential property.
There are now a number of lenders who will price loans – regardless of the purpose of the borrowing – based on the security offered. This means you may be able to have your business borrowings at home loan interest rates resulting in significant savings to you as the borrower. Even a 1% difference in interest rates, which does not sound all that much, can result in thousands of dollars each year you may be paying unnecessarily in interest.
Want to find out more? Contact ‘All About You’ Financial Solutions on (08) 9381 8311 or via email contact@allaboutyoufinance.com.au and mention that you were referred by Innova Business. They will then organise an obligation free review of your current facilities and can discuss the options with you to structure any business or personal loans you may be considering.
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