Loan deferrals have been one of the major components of financial support during the COVID-19 economic crisis. This financial support did not come from the government but from the banks. Loan deferrals have been a welcomed relief for many. Data released from the Australian bank regulator APRA, reveals there was a total of 414,000 mortgage deferral repayments in July. Almost one in ten home loans are on hold, an estimated $167 billion worth of loans. This figure does not include commercial lending such as equipment and business loans.
Holiday over for Loan Deferrals!
Banks have offered vital assistance through this crisis. But at the end of the day they are a business. This commendable support of loan deferral repayments has cost lenders. The banks need to improve their financial performance. They now need to restart payments. For hundreds of thousands of Australians this is going to put pressure on household incomes. If you are currently on a repayment hold with your lender you should expect a call from your bank in the coming weeks. As a result banks are now having some confronting conversations with customers.
High Levels of Stress Due to Loan Deferrals!
Families are experiencing a dramatic decrease with income and more alarmingly loss of jobs due to COVID-19. Reality is many people are under immense financial stress. The support from banks with deferral of loan repayments has been a lifesaver for many, but the lifeline has run out of rope. Understandably this is overwhelming and causing major stress for those who have lost jobs or reduced income.
Communication with Lender is Vital
The influx of loan deferrals has moved bank frontline staff to back scene roles. As a result the bank’s poor customer service reputation has only worsened. So what can you do if you cannot resume your mortgage repayments? The good news is the banks and lenders are more flexible with terms in the current economic climate. Make sure you communicate with your bank or broker. The key to managing your debt, is communication with your lender.
Finance Brokers a Smart Business Solution.
In these times of duress, many business borrowers find it less stressful by engaging a finance broker to liaise and deal with their bank. Finance brokers are accessible and you are usually dealing with the one person. This is unlike banks, when you can spend much frustrating time trying to get some service. When you finally do get service, it is invariably with a different person each time.
Financial Counselling Available
Predictions are, we are only just starting to see the real pain of COVID-19 with the worse yet to come. If you have any concerns, contact your lender or finance broker to notify them of your situation. Their expertise may have some solutions or they will refer you to a financial support team. Free and independent financial counselling services are available in every state and territory. The National Debt Hotline on 1800 007 007 is available for free and confidential advice from professional financial counsellors. The hotline is open from 9.30 am to 4.30 pm, Monday to Friday. Most lenders also have financial support. National Australia Bank has NAB Assist that gives guidance to structure a debt tackling plan for your unique financial circumstances.
Loans Deferrals Can Affect Future Loan Applications
Plant and equipment loans have been a smart and influential component with small business progress. One issue many businesses do not realise is that the loan deferrals can affect equipment finance applications. New equipment loans from existing lenders may undergo additional time consuming financial analysis. This is likely to occur if you have had a loan deferral. Some times this can be in the form of a full doc loan application. The comprehensive full doc can be for even a simple equipment replacement or an upgrade.
Loyal Bank Customer Frustrated!
A typical example of this was a plumbing business recently applied for a simple replacement vehicle lease. Usually the bank would roll this loan over into a new facility for this existing customer. The customer was asked for extra financial documentation to undergo a full debt servicing analysis due to his deferral. Weeks later, and after numerous frustrating hours with phone calls to his bank and accountant this plumber decided to engage a specialist finance broker. He engaged Will Finance an Equipment Finance Broker. The Broker was able to source finance for the plumber with low doc application and a cheaper rate. The broker’s low doc application was completed and submitted all before the plumber received a reply from his existing bank.
Brokers have the Know How
The collation and complexity of additional documents can take many hours but finance brokers get approvals quickly and efficiently with cost savings. Brokers get the best rates and deals as they are given wholesale rates from the banks and lenders.
Credit Flow Essential for Economic Recovery
Pre COVID, and post Hayne’s Royal commission, the banks criteria for lending had seen a decline in the number of equipment loans. With the realisation that credit flow is essential for economic recovery, the government is now considering reviewing the Royal Commission reforms. Businesses need quality reliable plant and equipment for operations and growth. Banks are hungry for business. Government realises that banks need to release funding for business growth and to stimulate our economy. So it is no better time for plant & equipment loans for businesses.
No Better Time for Equipment Loans!
Loans have never been cheaper. Efficient and time saving equipment has never been more important for business survival. Businesses need to invest in the best equipment for their recovery and future growth. COVID-19 has affected all businesses including banks and lending institutions. Lenders need new business. They are more flexible than ever with negotiating terms and conditions. Businesses need to take advantage of these lucrative deals to recover and progress. With the no cash outlay required, $150K instant asset write off scheme and many other tax incentives, equipment finance will continue to assist many businesses through these unprecedented times.