The World of Finance and Mortgage Loans

A big part of the economy of the modern world depends on transactions made by people at different times. These transactions can be for a commercial or even a personal purpose. You can make expenditures to buy a new home for your family or spend money to invest in your business.

However important each of the reasons for expenditure may be it may not always be a convenient time for you. People do not always possess large amounts of money to be spent accordingly no matter how important the reason is.

There are several ways that are available in the modern world that is offered as a solution to all your problems.

One of the ways that most people opt for in today’s world is to apply for an appropriate loan that suits their need of the hour. These loans are available with varying amounts of interest payments along with the principle amount at the end of the term period. But this is a convenient and safer option that is available to you at a critical hour.

It is vital that you weigh your options appropriately and choose the right type of financing that is available for your project.

Here are some of the options of finance and mortgage loans for your reference.

Commercial Mortgages

A commercial mortgage is a form of loan that is taken against an office or a business property that is used as collateral. These loans are mostly taken by business houses and commercial ventures that are run by partnership firms than an individual borrower.

Commercial loans are also available if a company wants to buy expensive machinery or make modern renovations for their offices.

Here are some of the criteria fulfillment clauses for your reference.

  • The bank or the finance company will check the cash flow finance of the enterprise. This is to ensure the source of income with which loan repayment will be made.
  • The credit history and background of the borrower. Records of earlier loan payments or credit card transactions and payments are important.
  • The nature of business and its current market position.

Bridging Loans

There are times when a person may be awaiting the approval of a full finance for a project from the bank. But there are some immediate expenses that have to be met by him as well to avoid heavy losses for the suture.

For example you are awaiting the approval of your home loan. But if you do not make a down payment within a certain date you will lose your chances of acquiring your chosen plot of land or apartment.

You can avail a bridge loan as an interim financial arrangement that is taken for a short period of time. The repayment time can range between 2 weeks to 3 years. They also entail a higher rate of interest.

Acquisition Finance

There are loan assistances available when there are mergers or acquisitions between companies as well. The need for the excess funding may arise from the need to improve the financial situation of the company or the pay off immediate debts.

This type of loans is also used to make stock purchases of a company by another company. Banks and finance companies check the credit history of the purchasing company along with their

Newer business policies of banks and finance companies have developed several loans schemes and procurement policies aimed at attracting people for a variety of reasons.

It is important that people understand their needs and make a proper choice.

Why SBA Loans Still Makes Sense For Your Business

Despite the problems with the Stimulus Package, SBA loans are likely still the best source of financing in the nation for your small business. The reason? Compared to the other source of financing available to small businesses, which really boils down to conventional financing (meaning that banks lend their own money and hold onto the loan in their portfolio), SBA loans remain the most reliable in terms of actually closing…

The underwriting standards for conventional small business loans are substantially tougher than with SBA loans and banks are much more “nervous” to lend without the government backing. For example, 85% loan to value financing on SBA loans compared to 60% loan to value on conventional. Debt coverage ratio’s as low as 1.2 on SBA, versus 1.4 for most conventional lenders. It goes on and on in terms of underwriting rules. The SBA underwriting guideline are by no means easy, but are more lenient than the other options out there.

There is another side of underwriting for banks that is more subjective and makes conventional lending more “fragile” for borrowers. At the end of the underwriting process, loan committees still have to make the “go, or no go” decision to fund the loan or walk. The risk for borrowers that their bank will cancel their loan request deep into the process, for subjective reasons, is substantially higher with conventional loans. It’s their money and they are that more skittish about closing. Bottom line if you have the option to go either route, SBA or conventional, take a long hard look at SBA loans for this reason.

As far as above mentioned issues with the government created Stimulus Package, the issue has really boiled down to uncertainty for banks which than trickles down to borrowers in the form of banks not wanting to lend and or not wanting to lend aggressively. The main problem for banks has been that the Stimulus has been activated, expired, than re activated four times now. And currently it is not clear whether or not they will reissue the 90% guarantee or not. They have been put in a difficult position at no fault of their own.

Historically the Guarantee for banks has been set at 75% on the popular SBA 7a loan. With the Stimulus they pushed the guarantee to 90% creating an incentive for banks to do loans that they normally wouldn’t consider.

So for borrowers that are proceeding with an SBA business loan request, it would be prudent to get them to agree to do the loan at 75% so that you prevent the chance of having the funding SBA lender pull out based on what the Government does or does not do.

The PayDay Loan Crunch – Why Not to Get a PayDay Loan

PayDay Loans are a growing trend in this present day economy, and Oh how evil they are. The state in which I reside allows Payday Lenders to register and operate legally. Not all States do, but in my State, there are as many Payday Loan stores in any given city as there are StarBucks or McDonalds. It is a crying shame because they do a very thriving business at the expense of people like me, the consumer.

Here is an eye opener for anyone who has not had a Payday Loan, the inner workings that lead to a cycle of debt. The maximum limit for a Payday loan differs from state to state as does the fees/percentage rate that can be charged. But here, where I reside, you can go to one lender and get the limit in my state, a loan of $1,000. This is a pay day loan, a draw against your next check. Keep that in mind, because you can then go to the next lender three doors down, and get another max loan of $1,000! Against that very same pay check! Yep, that is right. These stores have license to lend the max amount without checking your credit and on your good word alone that you can pay them back. I’m sure you can imagine what a mess this could turn out to be. An average consumer can pretty much get a draw way over and beyond what they actually bring home in their net pay. Hey, it really happens too. Sadly enough.

So, ok, you now have two $1,000 loans with terms of a finance fee averaging around $200 each, so payback due for a whopping total amount of $2,400 by next pay day. Yikes, what a mess you are in now. So, what happens if you don’t have that much to pay back the lender and still have money to eat and pay bills? Your option? Roll-over. Yes, these companies are allowed to extend you the courtesy of paying the finance fee only, instead of paying back the loan in full. On top of that, you can do this up to three times in my state. Therefore, by re-financing these loans three times, and then paying them off on the fourth month, you would end up paying in total: $3,600!!! Now, if that isn’t a fantastic business deal for the Payday Lenders! And for the consumer, well, they have really taken one in the shorts!

Now, one other option you have when re-financing these loans is to pay additional money toward the principal to buy down the final pay-off. So, say you put $300 toward the loan with the first re-finance. $200 goes to finance fees, $100 reduces the loan. You then owe $900 and have a reduced finance fee the next time, lets say $180. With your next payment, you can pay $280, reduce the principal to $800 with a re-finance fee of $160. Again, the next time, you pay $260, reducing principal to $700 and finance fee of $140. Then when your final payment is due, you owe $840 to pay it off. With this option you end up paying a total of $3,360 for the two loans, you saved a whole $240 overall. Whew.

I think you get the idea of how bad an idea it is to take a payday loan, or two, to get you through a financial crisis. Its a really bad idea! Believe me, and the sad thing is that consumers are getting caught in this trap over and over with very little hope of getting out. To actually get out of the mess, you have to have one lump sum of cash to pay them all off in full at one time. Its hard to see end to it in the near future for most consumers, they just keep plugging away, re-financing, re-loaning, getting deeper and deeper into the crunch.

Your best practice is to not take a Payday Loan, there are other alternatives, seek them out.