13 Ways on How to Solve Loan Problems

Not every loan process is smooth and straightforward, even though we’d like to be.

To make your  loan process as smooth and simple as possible.

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We’ll walk you through some of the most common problems and solutions encountered below:

How to Solve Loan Problems

1. Problem: Large Down Payments

In the early days of a business, cash flow is tight.

But, we’ve got that under control.

We only require a 10% down payment, while many commercial loans ask for 20 – 30%.

2. Problem: It’s Difficult to Make Monthly Payments for Commercial Real Estate

To protect their own cash flow and interests.

Lenders often offer only 15 – 20 years to repay the loan.

However, we offer repayment terms of up to 25 years.

Which keeps your monthly payments lower and more manageable.

How to Solve Loan Problems

3. Problem: It’s Difficult to Access SBA Micro-Loans and Ordinary Bank Loans

Unfortunately, there is this gray area in the world of business financing.

We help many small business owners by financing businesses.

With a net worth of less than $7.5 million, a net income of less than $2.5 million in the past two years.

And project sizes ranging from $250,000 to $15 million in total cost.

See also: Tips to Apply for Conventional Business Loan in Nigeria

4. Problem: Ordinary Banks and Economic Developers Don’t Provide Useful Financing for Small Business Owners

It’s just a fact of life. However, as an entrepreneurial Certified Development Company (CDC).

We fully understand exactly what you’re going through.

Basically, we’re the perfect fit for businesses like you looking to access commercial real estate or fixed asset financing.

How to Solve Loan Problems

5. Problem: Fees and Expenses for Bank Loans Make them Fiscally Insensible for Small Businesses

We finance the closing costs and other fees with our loans.

You don’t have to worry about losing another 2-3% of the loan value in fees.

The 10% down payment you make is the only cost for accessing the financing.

Read also: How to Get Federal Government Loans for Small Business in Nigeria

6.Problem: Banks are Scared to Finance Industries Causing them Losses in the Past

The only companies not eligible for a  loan can be found at this www.sba.gov/content/sba-financial-assistance-eligibility

7.Problem: Ordinary Loans Force a Refinance in 5 – 15 Years When Repayment is Due

You always pay a monthly payment with our loans.

Balloons, calls, and covenants are simply not present in our cost structure.

How to Solve Loan Problems

8.Problem: Sometimes You Need to Finance Equipment, As Well as Real Estate

Our  loans include the cost of equipment in the total project cost.

However, we do cap this cost at 20% of the total project cost.

Related: Top 21 Basic Loan Acquisition Tips in Nigeria

9. Problem: Ordinary Banks Place Lending Limits on Their Clients

If you experience this problem, remember we are a separate entity from your current lender.

They may cap your lending limit, but we do not.

10. Repay high interest loans first

As a first step, you need to prioritise the repayment of your loans. Make a list of all outstanding loans and then identify the ones that need to be tackled first. Ideally, start by repaying the costliest loan. Ravi Raj, Cofounder and Director, CreditVidya, says,“First attack the loans with the highest interest rate, such as credit cards and personal loans. This will reduce your interest burden going forward.” Pay the maximum amount you can afford against the high-cost loan without jeopardising the repayment of the other loans. Once you have cleared the costly debt, move to the next one. This technique is the ‘debt avalanche.

How to Solve Loan Problems

11. Increase repayments with rise in income

One simple way to repay your loans faster is to bump up the EMI with every rise in your income. Assuming that a borrower gets an 8% raise, he can easily increase his EMIs by 5%. The EMI for a 20-year home loan of Rs 20 lakh at 11% rate of interest comes to Rs 20,644. The borrower should increase it by around Rs 1,000 every year. Don’t underestimate the impact of this modest increase. Even a 5% increase in EMI ends the 20-year loan in just 12 years (see table). It helps the borrower save almost Rs 12 lakh in interest. “Whenever there is additional money flowing in, priority should be given to the prepayment of loans. If you have multiple loans running at the same time, make sure that you direct the additional payments towards the costlier loans, as discussed earlier.

12. Use windfall gains to repay costly debt

Received a fat bonus? Do not splurge on the lastest smart phone or newest plasma TV. Use the money to pay down your debt aggressively. Windfall gains, such as income tax refunds, maturity proceeds from life insurance policies and bonds, should be used to pay costly loans like credit card debt or personal loans. “Use a part of any bonus or proceeds from asset sales to bring down your costlier debt as much as possible. Founder, Ladder 7 Financial Services. However, remember that the lender may levy a prepayment penalty of up to 2% of the outstanding loan amount. While the RBI does not allow banks to levy a prepayment penalty on housing loans with floating rate interest, many banks do so for fixed rate home loans. Lending institutions normally do not charge any prepayment penalty if the amount paid does not exceed 25% of the outstanding loan at the beginning of the year. If you are likely to incur a penalty, compare the cost with the interest saved if you prepay the loan.

13. Make lifestyle changes

It is often the little things that go a long way in keeping your finances in fine fettle. While so far we have discussed different ways in which you could reduce your loan burden, you may also need to make some lifestyle adjustments to accommodate your loan repayments and ensure you have enough money to pay higher EMIs. A lifestyle change is needed until all debts are repaid. This means cutting down on luxuries and unwanted spending. Go slow on movie shows, dining out and weekend getaways. Keep the credit card locked up when you go to the mall and try to make purchases with cash. This will automatically curb your propensity to spend. “Put everything else on the backburner. Your planned vacation or home refurnishing can wait. Focus on reducing your debt first.

Just make sure you meet our eligibility guidelines, and you should be okay.