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Post by patricko on May 19, 2015 12:20:12 GMT
Obiously FC make a big chunk of their money on the 1% fee.
Do they charge a mark up on the rates offered to borrowers and lenders?
For example, on a fixed rate property loan at 8% plus 2% cashback over twelve months, what rate does the borrower pay?
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blender
Member of DD Central
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Post by blender on May 19, 2015 13:15:15 GMT
For large asset purchases such as property 5% of the loan amount is FC's fee, taken up front from the total collected. FC pays the cash back from its fee.
The interest rate paid by the borrower is 8%, or whatever else you see for a loan part, and FC takes one twelfth of its annual 1% lender from each monthly repayment - at least that is the case on business loans.
However, for the interest-only property loans the borrower does not actually make repayments and the interest is rolled up. To make the monthly repayments FC collects the total interest as part of the loan amount, keeps hold of it, and pays it back to us monthly.
But there is no mark up on the interest rate. Normally the lender borrower pays to the lender interest at the agreed rate - and FC just have their 1% lender fee, and the borrower fee of course. Yes they should make increasing profits from the 1% as the loan book grows.
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