Finance: Self-Liquidating Loans

Self-Liquidating Loans - Fact or Fiction?

Written by Keith Gill

FICTION! There is no such thing as a self-liquidating "LOAN." If you walk into a bank and ask for a self liquidating loan, they'll look at you as though you were nuts!

You may see ads promising -

- Self-Liquidating "LOANS!" - Investment Capital Overnight! - Your "LOAN" has been Approved! - BORROW Money And Never Pay Back! - etc.

A self-liquidating "LOAN" is fiction. You will never get a loan that you will never have to pay back from anybody. You need to be very careful when you are presented with repparttar opportunity to get "money for nothing!"

A true, self liquidating "LOAN", standing on it's own, is a pipe dream - it's perpetual motion. A loan that pays itself off is of NO benefit to repparttar 112015 lender - so, Why Would They Do It? The answer is simple - they WON'T!

Con men typically ask for up-front fees to get people a Self-Liquidating Loan. "Your "Loan" Has Been Approved" is their typical ploy. Since there is NO such thing as a Self-Liquidating "Loan" this should be a tip off that all they want is your money and you will never see such a "LOAN"! Remember repparttar 112016 money MUST come first, and if they can't prove to you how repparttar 112017 money will come first to create such a transaction, you will lose any money you pay to these con men.

Also beware of repparttar 112018 con men that do not charge front fees but want to see if you qualify for such a "LOAN", then notifies you later that you have been approved for a "Loan" and want you to pay points, closing costs, advance interest fees, etc.

But there is a way to use this CONCEPT!

In a Self-Liquidating Loan CONCEPT there are no such expenses! The money comes first, then repparttar 112019 transaction is created using a Roll Account (Compensating Balance)!

A Self-Liquidating loan actually does NOT exist. I know you see several ads in many publications advertising such a loan. There has been a mystique about these loans. Many people believe that to get a so-called Self Liquidating, Loan one only needs to apply and like magic, there it is! A multi-million dollar loan with money pouring out of repparttar 112020 envelope! Not so - but repparttar 112021 Self-Liquidating Loan concept is done every day and you can learn how!

There is ONE way for a TYPE of self-liquidating loan to exist. Remember, I said *type* of self-liquidating loan.

A better term for a "self liquidating loan" would be a Roll Over Loan, Roll Program or a Compensating Balance Loan.

Secrets Behind Interest Only Loans: Lower Payments, But Are They Right for You?

Written by Tony Baricevic

Interest Only loans gained widespread popularity in 2003 when FannieMae, repparttar

largest purchaser of secondary market home loans, provided guidelines to wholesalers for purchasing them. FannieMae calls it Interest First also known as Interest Only option. Until recently, this type of loan was common among seasoned investors who were looking for improved cash-flow allowing them higher profit margins and freeing up reinvestment capital. Interest Only options have also been available on 'negative amortization'* loans also known as Fixed-pay, Option ARM or Cash-flow ARMs among other names. However many Interest Only option loans like repparttar 112014

FannieMae Interest First do not have negative amortization.

How Interest Only Loans Work: The loan can have an adjustable or fixed rate with an option to make repparttar 112015 interest only payment for a predetermined period of time, say five years. Usually after that time, repparttar 112016 loan payments become fully amortized and are recalculated to pay off repparttar 112017 loan in repparttar 112018 remaining 25 years. This can result in a significant increase in monthly payment if no principal has been paid down over repparttar 112019 Interest Only option period, unless you refinance. The benefits of this loan are definitely cash-flow and it is also easier to qualify, since repparttar 112020 payments are significantly lower. It can also be a good choice for people who are planning to sell their home in a few years, as they will have had a significantly lower payment while possibly taking a tax deduction of repparttar 112021 mortgage interest. One risk involved would be if repparttar 112022 value of repparttar 112023 property decreased when it came time to sell and they didn't have enough funds to pay off repparttar 112024 loan.

Some common Interest Only option loans are; Fixed 15/15 Interest First which has an Interest Only option for repparttar 112025 first 15 years, or a Fixed 10/20 which has a 10-year Interest Only option and then gets amortized over repparttar 112026 remaining 20 years. There are also adjustable loans like a 5/1 ARM with a 5-year Interest Only option or a 3/1 ARM with a 10-year Interest Only option and still many more variations.

Example: Here is an example of a 30-year Fixed Jumbo Loan with a 10/20 Interest Only Option: A $500,000 loan at 6% APR has a fully amortized monthly payment of $2998 which pays off repparttar 112027 loan in 30 years. The Interest Only payment of $2500 is $498 lower per month. If you only paid $2500 each month for 10 years without paying down any principal, repparttar 112028 fully amortized payment would adjust to $3582 in order to pay off repparttar 112029 loan in repparttar 112030 remaining 20 years.

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