TENANTS LOANS: WHAT’S IN IT FOR THE LENDERS?

2007-03-08 10:33:40

( Financial )



Tenants loans are normally unsecured loans since its primary market, which are the tenants, are non homeowners hence they cannot put collaterals to secure the loan. Given the risk of offering tenants loans, you wonder why lenders offer it. But lenders are businessmen and saw the earning potential of tenants loans in the financing market.

How Lenders Earn from Tenant Loans?

Higher interest rates, lower loan amounts and shorter repayment periods are the factors that make tenants loans profitable for the lenders. These factors ensure higher earnings, fast capital turnover and liquidity to the lenders.

Higher Interest Rates

The risk of offering tenants loan is offset by the higher interest charged by the lenders. Compare loans in the market and you will see that tenants loans offer much higher interest rate. Tenants are least priority for loans with lower rates given its high risk potential in the traditional financial market. There is not much choice but to settle for tenant loans.

Lower Amount of Loans

Lower loan amount available for tenants loans is another precaution set by lenders to ensure collection of repayments within the possible time borrowers’ cash flow shows positive potential. Also, restricting the amount of loans enable the borrowers to afford repayments even with the high interest charged on the loan.

Shorter Repayment Period

Shorter repayment period, which is usually a maximum of ten years, allows fast turnover of capital for relending to other borrowers. It increases the potential to earn profits with the continuous turnover of capital. Quick repayments give the lender the liquidity to finance new loans.

Lenders initiate pre-approval precaution in selecting applicants for loan approval. Considerations on the borrower’s repayment capabilities are strictly implemented. Evaluation on borrower’s credit history and financial standing is conducted. Positive results accelerate approval process.

Good credit record substitute collateral in the analysis of the provision of tenant loans. The lender must be confident on your ability to repay the loan as well as on your probability to maintain good financial standing throughout the term of the loan.


All rights Reserved © Tradenet Services srl
Do not duplicate or redistribute in any form.