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Ben Kingsley Blog post by Ben Kingsley

Loan Structuring

If you are not familiar with the term then this article is for you…..

What is the definition of loan structuring:  In very simple terms it’s the way in which the loan product is set up to accommodate the borrower’s best interest, either in short, medium or longer terms depending on the client’s end goal, because we have to remember the goal of the loan is to secure a property, so a loan/debt product is really a short term means to a bigger end goal dream.

Loan structuring encompasses two main areas.

  1. Product Selection:  When you choose a mortgage you need to factor in quite a few things in your decision making process and as with any advice we provide our clients, there is not a steadfast rule that allows one loan product to suit every loan structuring scenario.  So when you are choosing a lender and loan type you need to understand the true potential features of the loan product on offer
  2. The Loan itself: How is the loan going to split (if at all), what security/securities are going to be provided as collateral to the lender for this loan.  Is it going to have an accompanying offset account , redraw facilities, do you make Principal & Interest repayments or Interest Only, etc

Loan structuring is about tailoring the needs of the clients with sound advice.  The problem with most people seeking a loan is they treat it like a transactional sale (buying a mortgage product). The frustrating thing about this for me is those people are missing out on receiving really valuable advice that has the potential to save them thousands or even tens of thousands of dollars.

Most customers don’t know what to ask about their loan structuring options and/or they deal directly with one bank instead of using a mortgage broker who can present a number of loan structuring options across a range of lenders.  They just become a ‘volume/transactional sale’ for the lender and that’s it.

A professional finance advisor should get on the front foot and at least explain to a consumer that there are options for them to consider and which will be part of an overall financial solution offering for these prospective clients.  Consumers will be willing to pay for this advice if they saw value in what was being said, because you cannot erase the past and it’s a costly process down the track to undo poor loan structures and mistakes made in the past.

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