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Can you have a high interest pay out local bank?
If I started a local bank or credit union, could I make my CDs and savings account pay out a higher interest rate, while my lending be strict and high as well?
For instance:
- for good to stellar credit, home loans with an interest rate of 10% requiring 20% deposit and a non-interest bearing offset account, with 10% of the mortgage in it
- for poor to middle credit, home loans with an interest rate of 10% requiring 30% deposit and a non-interest bearing offset account, with 10% of the mortgage in it
- for those unable to discipline themselves officers can create two savings accounts for them, which they deposit money into, that they cannot touch for a number of years, to accumulate the deposit and offset account, and a track record of making payments.
( Not everyone who has bad credit has no money )
A lot of "poor" people can make payments, and do so all the time. Brokerage firms do this all the time for would be investors. You pay into your brokerage account, until you meet the minimum requisites and then you start trading.
The point is to make a very attractive savings & loan / credit union, outside of the federal reserve thumb, that is for the local market, and works with most people in the local market.
The beauty of the offset account allows the lendee the ability to pay off the entire mortgage much faster and for far less than a traditional mortgage. It is truly a win win situation.
Is this a viable model? You may make suggestions about the interest rates.
Please keep in mind, the details concerning the "pre-mortgage" business plan, to work with locals with poor to middle credit.
That aside, the question was about the business plan, than getting bogged down about what bad credit means.
An offset account is very specific and it is not a deposit. An offset account can be used like any other savings account. You can withdraw money from an offset account, you would simply be charged the balance of the withdrawal on your next mortgage payment.
An offset account, specifically buys down the interest on a mortgage. I don't think it's exotic lending, and I don't know how new it is, but many banks now offer it.
As far as bottom feeding, I wouldn't offer it to people with both bad credit, and bad payment history and no job or very little job. This is not ninja loan business planning. There are people with "bad" credit, due to bankruptcy, their spouse, emergency sickness, defaulted on a school loan, or just getting shafted by unscrupulous lenders that committed predatory lending on them. I met a lady paying $60,000 for a $30,000 car. It happens.
Some people have excellent payment history and marks on their credit. These people need people to work wi
4 Answers
- Go with the flowLv 79 years agoFavorite Answer
Problem:
Trying to find someone with bad credit (items in collections/ money due to companies) that has money saved up.
If they had money, they would pay off their collection items and have good credit.
Problem #2:
Collection agencies tend to sue. Garnish wages and go after assets. This would make that persons income less, and they could start not making mortgage payments.
Liens can even be put on a home. Example: Back taxes
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I hope you go to college for finance.
- BIll QLv 69 years ago
You appear to be using non-standard terms, which makes it hard to understand what you are talking about. For instance, you don't use the term "down payment," which is what most people use. I don't understand this sentence:
"for good to stellar credit, home loans with an interest rate of 10% requiring 20% deposit and a non-interest bearing offset account, with 10% of the mortgage in it"
Are they putting down a 20% down payment, or are they putting down a 20%+10%= a 30% down payment?
My impression is that you are just requiring people to make a larger down payment, then they put the extra 10% in a "offset account." I don't see how this has any advantage over just requiring a larger down payment without putting the money in an offset account. However, maybe I understand your system improperly.
- 9 years ago
dont offer it to bad quality clients is my advice just stick to people you are sure can make the repayments. For example look at there background, education level, previous work experience, collateral such as a car or something. You have to define poor and if you go bottom feeding and all the poor people work at clothing stores and the economy takes another hit and they lose there jobs, they default as they are unlikley to find other jobs( because everyone else will be too) vs an educated skilled worker. The deeper you go into this the more tailor made your company will be and it will suit the need of you and your customer better. This is your advantage over bigger banks. :D good luck
Source(s): me - curellaLv 45 years ago
there is not any seize, they're all individuals of SIPC so that you won't be able to lose you money till you position more beneficial than $100,000 in an account. (in simple terms open distinct) they're saving funds by utilising being on line and favor your business enterprise.
