You may perhaps have heard loans being offered to individuals and businesses alike and would like to apply for one. If caveat type of loan is to be applied, then you need to know, how to get it the very first time after application and without your request getting rejected by the lender. There are few things that you need to be aware about.
Information to know about caveat loan
- What reasons are there for such loans to not get approved: It is a simple type of loan. There are just four things which may make such loan applications to get rejected, unlike that of home loans.
- Business Purpose: It needs to be 100% genuine. If not so, then this loan cannot be funded to the applicant, irrespective of the amount of equity available.
- Property Value: This reason is quite common for home loan applications to get rejected. The lenders just valuate property value. It is necessary for applicants to have better idea of their real estate’s realistic value. Short term lenders generally offer 70 to 75% LVR.
- Debt Level: Overdraft if any, is not realized by many applicants, while others may secure finance facilities with their real-estate assets. It shows increased debt level, thus blowing up LVR.
- Exit Strategy: These are short term emergency funds. Hence, viable exit strategy will be essential. Exit not necessarily needs to be present, but there is to be genuine intention, with delivering ability. Credit history and financials not required by many Caveat Lenders.
- Common Pitfalls: Entrepreneurs find such loans to be useful, without which their chances of failing in business is high or they might miss out on great opportunities. A common assumption about these loans is that it is meant only for those who are desperate to acquire finance and losing their business. On the contrary, borrowers have been successful by availing such loans and use real estate equity to borrow money urgently to make profits.
- Collateral Security: Real estate security having suitable equity is accepted. But depending upon location and type, LVRs might vary. There are lenders who provide 50% rural security, 70% commercial security and 75% established residential security. But certain specialized security might not be accepted, like contaminated sites, for instance, petrol stations.
Those interested to apply for caveat loans, be it businessmen or individuals, it will be wise to contact the brokers who can provide valuable and updated information on the available loans in the market, including this type.