Short Term Caveat Loans Vs Bank Loanscsadmin
Many people only know of bank loans as the only way to secure money when needed. However not everyone can get approved for a bank loan whether it be because they need it quick or they have a bad credit history. Short term caveat loans can often be a wise financing decision for many Australian business owners who require urgent funding. Knowing which to choose boils down to which loan you’ll be able to be approved for, bearing in mind that everyone’s financial needs are different and therefore what may be the best solution for you financially might be different from someone else. Below listed by Credit Solutions Group are a few key points to consider in terms of short term caveat loans vs bank loans, to help you decide on which to take.
What is a caveat loan?
Caveat loans are a type of short term finance where the funds are secured by a charge (known as a caveat) on your property. Funding is obtained from a private lender instead of a bank and is secured against the value of your property’s equity. It is the quickest way to obtain money out of your property and can provide an instant solution to an urgent problem.
Bank loans or loans from a traditional lender are currently the most popular and widely sought after funding option due to its low interest rates. Bank loans are able to offer lower interest rates because they have a lower cost of funds than private lenders. Banks also have easier access in funds to lend out from depositors’ checking and savings accounts. Besides their own funds, banks also have access to central funds. As of December 7th the official cash rate sits at 1.5%, a considerably cheap rate if taking into account in the past it has been around 5-7% and has even been as high as 17% in 1990. Short term caveat loans or loans from private lenders obtain funds from either investors who are looking for decent returns or from other banks and financial institutions who lend funds to private lenders at a higher rate than what it costs them to acquire that money. Both these options raises the costs of private lender funds which in turn gets transferred onto their loan rates. Therefore bank loans usually offer lower interest and fixed rates whilst private lenders tends to have higher interest rates.
Despite the low interest rates, the application process of a bank loan can oftentimes be a tedious and time consuming process. As the mortgage market grows more competitive and Australian household debt grows rapidly, so do the terms and requirements of bank loans getting stricter. Banks have stiff regulations that must be strictly adhered to. These regulations are put in place to not only protect their depositor’s money but to also make them obligated when making loans. These requirements can include high credit scores, a clean financial history, high cash flow requirements, low debt-to-income ratios, time in business and other documents. Collating all the necessary documentation can be a lengthy process that requires more hassle than it’s worth. These requirements also often disallows banks to lend to new or small, growing businesses and denial for a loan application can easily result from foreclosure, bankruptcy or a less than perfect credit score. Therefore for businesses who need urgent loans to start or save their business, bank loans may not be the most viable option. Short term caveat loans requires no valuation necessary and you can obtain it regardless of bad credit history.
Short term caveat loans are usually approved within 24 hours of receiving your application with little attention to the applicant’s income or credit history. They are designed to be settled quickly and as such there is no need for valuations, credit checks, and bank style reporting requirements. The only requirement is that your property needs to have equity as this is offered as security to private lenders. Usually caveat loans are not applicable to all borrowers as the loan term range is quite short, from 3 to 6 months. Whilst caveat loans offer a short term repayment schedule, bank loans offer repayment over a set number of years. However fluctuating or adjustable terms could make payments become more expensive over time on bank loans if interest rates are increased.
At Credit Solutions Group, we’re committed to helping Australian business owners achieve their financial goals. Call us at 02 9199 7477 or contact us to find out more on short term caveat loans or our other credit solutions options provided – such as first and second mortgage loans, mezzanine financing, and construction financing.