A short term caveat loan is one of the fastest loans you can access when you need cash fast.
These little known business loans can provide big benefits for existing property owners who are seeking funds in a flash to be paid back just as quickly.
Diverse Funding Solutions are experienced at delivering fast finance, so we encourage you to keep reading to discover 7 major benefits of short term caveat loans and how they can work for you.
What is a caveat loan?
A caveat loan can be looked at somewhat similarly to a second mortgage, where you use an existing property as security to borrow additional money.
However, there is more than one fundamental difference between a caveat loan and a second mortgage.
Firstly, caveat loans are usually only offered through private funding; this means that the lending criteria is usually very different to the traditional bank standards.
This can work in your favour as you won’t need to come up with a pile of documentation nor undergo a credit check with a caveat loan application.
Secondly, the loan term of a caveat loan is short, typically anywhere up to 36 months.
Of course, second mortgages can have shorter loan terms as well, but the loan process can prove far more onerous, and the loan amount is usually much less than a caveat loan.
How does a short term caveat loan work?
If you hold an existing real estate property that you have sufficient equity in, a lender places a legal caveat over the title of the property as a form of security for the loan that they provide you. This is how a caveat loan is formed.
Once you’ve repaid the loan, the lender’s interest is immediately removed without the need for complicated paperwork.
Caveat loans in Australia don’t technically release equity in the security property.
Private lenders simply use the caveat over your existing property to restrict a property sale while the caveat is in place, until you can pay back the loan.
What can I use a short term caveat loan for?
Business owners all over Australia use caveat loans every day to help them step more confidentially towards financial success.
Here are some of the ways Diverse Funding Solutions clients have used fast caveat loans:
- Small business owners can use a caveat loan for business purposes such as overcoming slow cash flow, paying their tax bill and taking advantage of opportunities that need immediate funding
- Property buyers gain a competitive advantage in the tight investment property market to purchase their next investment property with quicker finance than the competition.
- Those looking to take advantage of the strong property prices have also used a caveat loan to bridge the finance gap between purchasing a new property while waiting for settlement of their existing place.
- Property developers are no stranger to using a caveat against their development to spur the project to completion, then paying out the loan once funds have come in.
What are the benefits of a caveat loan?
Caveat lending is typically only available through private lenders, which provides enormous benefits over bank loans and other small business loans (especially ridiculously expensive payday loans!).
The flexibility that comes with private lending is undoubtedly the biggest benefit, and translates into our favourite 7 benefits:
1 . You can access larger loan amounts than second mortgages
You are not restricted to only accessing 50-75% of the equity of your security property (as you are with other lenders for business purposes).
Caveat lending allows you to access up to 80% of the equity you hold in your home, taking the worry out of whether you’ll have sufficient funding or not.
If the property value of a home you own outright is $1million, then you can access up to $800,000. Caveat loans, therefore, provide a more meaningful loan amount to satisfy your needs.
2 . Self-Employed people are accepted for caveat loans
It can be a frustrating and tiresome experience, trying to apply for traditional finance when you’re self-employed.
Private lending affords the ability to offer caveat loans to self-employed individuals, as it is not bound by the lending criteria of standard credit providers.
3 . Caveat lending is accessible even with bad credit
Just as self-employed Australians are provided grace via the private lending format, so too are those with a less than desirable credit history.
Most of the time, our application process negates the need to conduct a credit check at all!
4 . You can use a security property with an existing mortgage on it
Did you know that you can take out a caveat loan on a property that already has a mortgage attached to it?
This is possible because a caveat loan doesn’t take out any additional finance that would require a sale of the property to fund the loan if you default.
Instead, a caveat sits behind any existing mortgage, and the lenders devise a suitable exit strategy in the unlikely event you can’t repay the loan.
5 . You’ll probably pay lower interest with a caveat loan vs other short term loans
Naturally, having some form of security over a loan means that caveat loans generally have lower interest rates than other, unsecured short term loan options, meaning you could save interest.
6 . Fast and easy approvals
Our application process makes for a fast and easy approval — there’s no property valuation, need for bank statements, tax returns, revenue forecasts or waiting around for a pre-approval.
In fact, Diverse Funding Solution can offer you a fast-tracked approval after a super simple, one-minute express quote.
Caveat loans settle faster than mortgages and other short term loans, making them an excellent choice for when there’s a time-sensitive opportunity that needs funding, now.
7 . Early repayment is possible
Other lenders will usually rely on you taking the entire loan term to pay off the loan amount, meaning they often penalise you for repaying the loan early.
Our business caveat loans don’t have to restrict you to rigid repayment schedules or penalise your early repayment.
This means you don’t need to be tied down to a financial commitment longer than need be. [fact check]
Frequently asked questions
How are caveat loans secured?
A legal caveat is placed over the title of an existing property, allowing the lender to use the equity you hold in the property as security.
Can I use international property to secure a caveat loan?
Unfortunately, most lenders do not accept overseas properties as security against a caveat loan. At Diverse Funding Solutions, we can only accept assets as security that are owned in Australia.
Am I eligible for a caveat loan?
Caveat loans were traditionally for ABN or ACN holders with existing property, but this is no longer the case!
Caveat loans can be used as a business loan facility, but also suit individuals who are asset rich but cash poor.
Can I refinance an existing caveat loan?
Yes! If you have an existing caveat loan, we may be able to pay it out and save you some money.
Who offers fast caveat loans?
Diverse Funding Solutions is one of Australia’s fastest-growing finance broking firms who are specialists in private lending.
We have offices in four capital cities but provide finance solutions to clients Australia-wide.
If you think it’s time to get a caveat loan and want to experience our five-star application process, then we are ready to help.
To apply for a caveat loan, simply request a quote to experience excellent customer service with the caveat loan pros at Diverse Funding Solutions.