Caveat loans are similar to mortgage or charge over the property. In these, the funds are received and the lender puts a charge on the property so that the debt is repaid. These can also be behind another mortgage on the property.
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In order to avail Caveat loans, equity in real estate property is needed. The equity is difference of the value between the debts on the property and the selling price of it. This is also referred to as LVR or Loan to Value Ratio. This is the main requirement of getting a caveat loan.
These loans are usually applied when the person or the business cannot go to the banks and needs the funding fast, in cases where not obtaining the funds outweighs the cost of applying for the loan and solving the needs of the individual or the business.
These funds are available in such a short period of time, are usually more expensive than the funding that one would be able to get from the bank.
What are the eligibility criteria to avail caveat loans?
In order to be able to qualify for a caveat loan, the lender usually not only checks the real estate security but also the exit strategy of the business or the person.
Tax returns as well as a good credit history of the person or the business is also checked. In order to approve these loans, verbal loan approval is generally required and that takes a matter of hours and usually settlement takes days to complete.
Borrowers need caveat loans when the cash is needed in a short period of time. This could be for different reasons – for business, for investments, to pay the debts or for property reasons.
Whatever be the reason, when the person avails a caveat loan, it means that he or she needs the funds urgently in a short period of time and is also aware of the time period that the loan is required for. Normally the time period is for a period between 1 to 12 months. The person is also aware while taking the loan how he or she will be able to pay it back.
Companies can buy stocks or repay market debts by availing caveat loans:
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Caveat loans can be availed by businesses who want to buy stock or who want to repay debts or for property purposes or for any purpose where the cost of taking a loan is much lower than missing out on the deal as a result of not having the necessary finance.
These loans can also be used when property buyers buy new property even though their existing property is still in the process of being settled. These funds are usually borrowed by project managers, property owners, borrowers who need funds immediately as well as business men and women.
These loans are also taken by people who have no finance or have poor credit scores or who cannot afford to wait for the banks to pass their loans and need the finance immediately.
A caveat loan can be availed much quicker than a mortgage and sometimes another mortgage lender is registered behind it.
These loans are availed when the banks have either refused the loan or when the business or the individual does not have good credit score, when the funding is needed only for a short time period and when there is low documentation needed. It is also availed when the banks are too slow to process the loans.
Thus it proves that the caveat loans have built a successful reputation in providing fast business finance options to the clients.