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Characteristic of Caveat Loans

BY: Marketing Manager | Category: Finance | Submitted: 2011-03-16 20:21:37
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Article Summary: "Caveat loans are also known as bridging loans, or sometimes swing loans, no matter how people called them, they are short term loans that usually takes less than a day for approval, and a few weeks for repayment, unlike the long term loans that takes years to finish repayment....."


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Caveat loans are also known as bridging loans, or sometimes swing loans, no matter how people called them, they are short term loans that usually takes less than a day for approval, and a few weeks for repayment, unlike the long term loans that takes years to finish repayment, the reason for caveat loans to be called caveat loans are because most the time it is a permanent step for individual or business to reach the next stage. Usually caveat loans have a higher interest than any other loans, because of the additional risk the lenders have to take, also because caveat loans are short term loans, so it is reasonable for lenders to charge a higher interest rate to gain reasonable amount of profits. Caveat loans are often used for real estate sales and purchase, from selling a property and gain ownership of another property, and the settlement time can take up to a month, so it is when caveat loans comes in and give you the money needed for the mortgage of the new property.

The interest rates of caveat loans are usually around 15% and they usually comes in two type, closed caveat loans and open caveat loans. Closed caveat loans are fixed repayment days, so there is a timeframe for each payment and we know when the loan can be paid off. While open caveat loans have no fixed timeframe, the borrower simply needs to pay off the loan after a certain time. It is interesting that the charge for first and second caveat loans can be different even if the borrower is applying for the same type of loan, this is because the lenders understand the risk for lending the borrower money is lower, and that can be known as good credit record. To lenders and borrowers, caveat loans are still risky, determining and accessing the risks are very important.

The most common borrowers for caveat loans are project managers, home owners and business owners. They all borrow money for different reasons, but some for similar reasons. Most the time, project managers borrow caveat loans for the completion of the project, they simply requires more money to complete the project they are doing to receive the payment for the project. Home owners simply needed the money during the settlement period to pay mortgage for the new property they are planning to purchase. And business owners simply needed money for their business cash flow, to either get their business to run smoothly or to expand their business.

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