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LucasArthur
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ThexArm, post: 207349 wrote:
When I was reading Jason’s reply I was just thinking why would the lender cares how the money is being used as long as their repayments are paid regularly. Personal loans are to be used for personal reasons. Be it a overseas trip, wedding or buying a car or whatever. If the lender is not satisfied with the applicant that he may not be able to pay back ( ex. No supporting income or no supporting guarantee or no supporting assets) then they won’t approve in first place. As long as he has got the approval and got the money they he can use it on the project.

I do agree that it’s a big risk to use personal loan to fund their project if they don’t have a regular income.

Howdy

Just want to re-iterate that i am not 100% sure although there is a clear delineation in lending from the major institutions between ‘personal’ and ‘commercial’ lending with each have their own merits of assessment and criteria.

Although it is not clearly spoken about on websites and other application processes, you tend to find the moment you advise it is for ‘commercial’ lending and that the funds are being applied for to ‘fund’ a business the tone of the application shifts immediately. Reason, the loan is NO LONGER being used for ‘personal’ reasons (other than, i want a business which is not personal lending) and is clearly being used for ‘commercial’ interests.

Being an Accountant, i am sure the two variables are clear? (not picking here so my apologies)…

If you apply for a personal loan for say, as the banks web sites tend to infer, a boat or a car or a holiday or to consolidate personal loans and so forth your assessment is based on simple eligibility criteria that tends to circle around the following:
– Be at least 18 yo
– Currently residing in Australia
– Have regular income
– Have good credit rating
– And a minimum requirement – this varies although tends to be $5k +

as opposed to borrowing for commercial applications which tend to require:
– Be at least 18 y/o (as guarantor)
– Be Australian Based
– Have documented history of profit, strong balance sheets and projected cash flow based on last few years of trading
– Have good Credit Rating
– Executed Directors Indemnities for the loan
– Directors of good standing, both credit rating, personal balance sheet etc
– Used for commercial purposes

The reason that banks tend to do the clear delineation is that the assessments are very different as you can tell from the above. Lets say that someone is applying for a personal loan for starting a business this would circumvent the eligibility criteria of commercial lending as the business that is to repay the loan (which is obvious that this is the intent as its being used to create said business) is not being assessed and the merits of the repayment schedule have been completely overlooked other than a personal assessment. The entire picture is not being disclosed to the bank about the business and therefore near impossible for a Bank to make an evaluated decision on the loan based on ALL FACTS as not all facts have been disclosed (p/l, cash flows, etc are not be looked at)…

I know its long winded reply, and apologies, although i originally replied to the post so the the OP could make an evaluated decision on how this moves forward and to just clarify the comments from the broker to ensure they are not misleading the institution in any way by not disclosing everything. Because if this occurs there can be rather large repercussions.

It may all pan out that the broker knows a bank that has more lenient processes for applying for a personal loan, although i personally doubt this.

Again, just to summarise banks have 2 clear channels within their marketing space and one is Personal Banking and the other is Business/Commercial Banking. If they did not differentiate between a Personal Loan and a Business/Commercial Loan why is there 2 clearly different faces to the Big 4 Pillar Corporations that exist?

Anyways, as i elude to sometimes i have a lil experience in this area and have seen many things tweaked to benefit the applicant and none turn out well when things go wrong (if they go wrong)…

Cheers
Jason

ps.. as a side note… and i am not a residential lending expert.. i even hear that if you have a residential mortgage and for some reason your financial circumstances change, you are obligated to advise the bank in which the loan is held of this change otherwise you are technically in breach of your loan :(.. MMM, does anyone do this? when you change jobs? when you take maternity leave? when you have lunch and so forth..

Jason Ramage | Lucas Arthur Pty Ltd | E: [email protected]   P: 61 3 8324 0344    M: 61 412 244 888