As we are now into January 2019, the majority of banks and financiers I deal with are starting to ask for finalised Financial Statements for the year ending 30th June 2017 and 2018, in support of any new credit applications. In some instances, they will consider interim Management Accounts provided the corresponding BAS Statements are also supplied........It’s getting harder people, so make time to get your business affairs in order, even if it means having your accountant earn their fees. ... See MoreSee Less
Here’s a friendly reminder to all who used the services of Afterpay over the festive season. REMEMBER, you signed up to make 4 equal payments due every 2 weeks by direct debit against your debit or credit card. Miss one of those payments on an item that cost less than $40 and you will be charged a late fee of $10, which is a simple interest rate of 25%. If the item cost you more than $40, the same interest rate is applied, but (currently) capped at $68. While figures to date show only 5% of due payments have been incurring a late fee, the next few months could prove interesting. ... See MoreSee Less
BE CAREFUL OUT THERE! I was asked to arrange finance on a large machine this week that was listed for sale on a well known used equipment web site. Buyer sent me all that I asked for to put the loan in place and I told him to wait 24 hours while I did my checks, but he didn’t listen and paid a $20,000 deposit by bank transfer that the seller was demanding on the pretext of holding the machine. I continued to run my usual checks & balances and discovered the supplier invoice details did not align with my searches. On being told of this, the buyer went and checked the premises himself, only to find it was an empty office in a block of serviced offices, with a centralised answering service. Buyer is now trying to recover his money via his bank, but it looks like he has been the victim of yet another scam. They walk among us, so be careful people. ... See MoreSee Less
Commonwealth Bank CEO, Matt Comyn admitted to the banking royal commission yesterday that the bank had sold credit card insurance to over 64,000 customers who were ineligible for the insurance due to being unemployed......Maybe they should all do some of their own compliance training that gets foisted on we finance brokers every 3 months......Just a thought! ... See MoreSee Less
As the financiers in the Consumer Loan market start to implement changes to the way they assess new loan applications, one of the elements being taken into account is the Loan to Value Ratio (LVR), which represents the amount being borrowed as a percentage of the car’s Recommended Retail Price (RRP). In most instances, borrowers tend to include all the On Road Costs, GST, Financier Charges and Loan Insurances into the new loan amount, which can results in the LVR on the car going well over the 120% mark.
Having taken the LVR into consideration, the financiers will then apply a loan rate that reflects the risks associated with the amount being lent against the car's RRP, hence the higher the LVR, the greater the potential for the loan rate to increase. By way of example, consider the following indicative rates as they might apply to a new car.
Now with those numbers in mind, you can see that you have the potential to negotiate a lower loan rate, simply by reducing the LVR by reducing the loan amount, either by trading your old car or using some of your own cash savings.
The amount required will naturally differ from car to car, however it can often take as little as $2,000 to bring the LVR on the car you are buying, into a lower rate band which in turn has the potential to save you on interest charges over the term of the new loan ............
While acknowledging there will be many variables from one vehicle to another, coupled with different driving habits, financiers are starting to take a closer look at the real cost of car ownership, when it comes to assessing the borrower’s capacity to repay the intended loan.
Although there are, as yet, no fixed matrix numbers, we are starting to see allowances being based off the comprehensive tables produced by the RACQ (and others) on a regular basis that allow for the indicative costs of Private ownership of a vehicle travelling 15,000 klms per annum over a 5 year term that take into account Standing Costs (Registration + Insurance + Licence + Membership) and Running Costs (Fuel + Tyres + Services.)
With most car loans now running for 5 years, if only from a repayment perspective, here’s an example of the Average Monthly Costs for a couple of sample vehicles.
Hyundai i30 Active 2.0L Auto 5dr Hatch $373.07 Mazda 6 Sport 2.5L Auto 4dr Sedan $397.64 BMW 318 Sportline 1.5L Turbo Auto Sedan $482.26 Ford Ranger XL 3.2L T/Dsl Auto 4x4 C/Cab $470.42
So what’s the point of all this?
Next time you apply for loan and I ask what you think it costs to run your car each month, don’t take a guess and say it’s about $100 as I (and the financier) will revert to tables of this sort, unless you can provide a reasonable explanation as to why your figure is different ...... Want to know more? Call me – 0413 866 957 ... See MoreSee Less
TUESDAY TIP - AFTERPAY As I gather financial history off bank statements, I am starting to see a growth in the use of Afterpay, which is nothing more than an electronic lay-buy system. The idea behind this service is that you take possession of the goods today, and agree to make 4 equal payments every 2 weeks by way of a direct debit.
However, if you miss one payment on an item that costs less than $40, you pay an extra late fee of $10, which is an interest rate @ 25%. On larger cost items, the fee is capped at $68, which is still a big hit on an item that may have only cost you $200.
The point here is that these payments are starting to be taken into account by lenders and may impact on your capacity to service any new loan. Although it currently appears that only 5% of instalments incur a late fee, some 22% of users have paid the fee and the number appears to be growing, as is the company share price, which probably tells you all you really know. ...............Want to know more, call me – 0413 866 957 ... See MoreSee Less
TUESDAY TIP - BUDGETING: How many of you are living according to a budget? As part of the responsible lending process, I am required to ensure that the borrower has the financial capacity to meet their day-to-day living expenses PLUS the cost of the intended new loan payments. With the increase in payments methods for things these days, a closer at bank statements shows that not enough people are living according to a budget, which although considered by many to be a dirty word, is a powerful tool.
Take a closer look at your bank account and see how much you are spending on your coffee each day simply because the tap-n-pay system is so easy to use. If the number was $10 per day, that becomes $50 a week or close to $200 per month which gives you some idea of where you money goes and should, make you start to question what other points of leakage there are that you just don’t account for. ... See MoreSee Less