Posts Tagged ‘repayments’

The dangers of an interest-only mortgage

Have you been enticed by an interest-only loan or mortgage?

An interest-only mortgage may initially seem like a brilliant prospect when you decide to buy a house; an interest-only period where you only pay back the interest of your loan rather than what you’ve borrowed is an attractive option for many.

Lower monthly repayments mean you’ll free up more cash, and you’ll have a long time before you must actually start paying back what you owe (the interest period on interest-only home loans is usually five or ten years). An interest-only loan might simply be the only option you can afford at the minute. However, there are dangers to consider when going in for an interest-only loan that you should be aware of before signing up to one.

Zero-progress payments

When you sign up for an interest-only mortgage you’re essentially signing up to be giving away your own cash for several years without even putting a dent into the actual amount you’ve borrowed. Consider how much your total payments for the interest period will be once it’s over, and then added that to the amount you’ve borrowed. The final sum may not be as an attractive option as you first thought. You could possibly be signing up for a loan which is going to charge you a huge surplus on what you need to borrow, and it may be worth simply waiting a year or two and going for a traditional loan that could be much cheaper in the long run.

Putting off the inevitable

Many consider ten years to be a lifetime away, but it will, of course, come around eventually. An interest-only loan may delay reality for a period of years, but you should be aware that you are going to have to pay the full amount back one day, in addition to a hefty sum accrued over the interest period. Always think of the total amount repaid when considering opting for an interest-only loan rather than the eye-catching, attractive monthly repayments.

What if you already have an interest-only mortgage and are approaching the repayment part?

Those of you who already have an interest-only mortgage and are approaching repayment should be vigilant to the fact that it’s been ten years since the recession. As a result of this, house prices have fallen and many may be in negative equity, meaning that there could be serious financial implications including insolvency, bankruptcy and asset seizure should you not be able to meet repayments. If this happens, you can rest assured that Bell & Company will be right by your side to provide high-quality services and advice regarding debt management, personal and business insolvency and business turnaround to remedy your situation. Are you looking for sound financial advice from a team of experts in the field? Call 0330 159 5820.

No company is too big to fail!

Why do many large companies view themselves as being “too big to fail”?

Huge businesses turning over hundreds of thousands of pounds a year can be being a million miles away from a small, family-run business.

It’s important to remember, however, that debt still needs to be paid off whether you’re running a massive investment bank or a family bakery. Evidence has proved over recent years that no company is too big to fail, a point that all large businesses should never forget.

2008 Financial Crisis.

The term ‘too big to fail’ was coined after the 2008 financial crisis. Being ‘too big to fail’ was seemingly the impression that many huge companies had of themselves. They were so large, that if they went bust, they’d have a catastrophic chain effect upon the economy. Therefore, would have to be bailed out. The name that springs to mind, of course, is that of Lehman Brothers.

The enormous investment bank had a staggering sum of $619 billion dollars’ worth of debt when it filed for bankruptcy, the largest ever case of bankruptcy in history. This all came as a result of the company being too eager to lend. Buoyed by its own size and swelled by its importance in the market. The company allowed itself to get into debt that it couldn’t have any hope of paying back.

Many contest that simple business acumen such as considering when money can be paid back and not allowing the business to fall into too much debt could have avoided the initial reckless lending, and subsequent collapse that followed. Alas, this didn’t happen. You may have noticed that Lehman Brothers are no longer with us today.

What should we learn from this?

The lessons that businesses need to take away from the fall of Lehman Brothers is that no matter how large a company they are. They should always be aware of the warning signs of impending financial trouble. Poor retention of money being lent or bad rates of repayment on payment plans for products could signal an incoming crash.

Likewise, businesses should be careful about how much they initially lend out and ensure they only lend to clients who have a realistic prospect of paying for what they owe.

If the worst happens, businesses should immediately turn to debt-management experts for the right solution to financial troubles, insolvency and business turnaround.

Call us on 0330 159 5820 or read our E-brochure for further information on Bell & Company and the service we provide.