What is a Roll Over Loan?

Simply put - a roll over loan is a security-based loan that starts out with a security such as a CD, zero coupon bonds, government savings bonds, debentures, bank notes, etc. as collateral for loan and as final payment for loan.

These can be purchased at a fraction of their end value and can be used as collateral for a loan.

Example 1a:

An example would be Government Zero Coupon Bonds. These bonds can be bought at a discount of normally 33% of face value. A $1,000 face value bond could be bought for around $330. The government guarantees you a return of $1,000 or a $770 profit. Offering this secured financial instrument to a financial institution as a compensating balance for your loan creates a form of a self-liquidating loan. Borrow $1,000 and receive $770.

Example 1b:

Another example would be life insurance or annuity. If you have an annuity that pays a fixed or variable amount it would be possible to instruct this financial instrument to be used as a compensating balance for loan you want to take out. In fact many times insurance company could be in a position to arrange this form of a self-liquidating loan via an annuity.

Example 2:

You will need to find an investment group that functions in an offshore environment. (An offshore environment provides you with higher interest rates and higher returns on your money along with lower lending rates.) Use this group to leverage your money, thus creating a compensating balance. This creates, in effect, a "self liquidating" situation. In this example you not only receive a "loan" but you will receive a residual income besides!

Final Note.

Remember, if there is no security placed up front, NO lender will even consider providing a loan under these conditions. However, there are places where you can find information on how to create a roll program! You just have to find one that you can trust.

This article courtesy of http://www.quicloan.com. You may freely reprint this article on your website or in your newsletter provided this courtesy notice and author name and URL remain intact.

Some people put savings in payment towards common investments like stocks, bonds or mutual funds, hoping to earn money on payments that they would have normally paid towards principal. People using this strategy on a primary residence would need to earn a higher rate of return than interest that is being charged on loan to stay ahead. This is because they would not be paying down loan and their capital gains on other investment may be taxed on withdrawal, so they would realize much less profit. Not to mention if they took a ‘loss' on that investment, they would be paying more interest on their loan AND realizing a loss of their diverted investment capital.

Another important distinction is if they chose not to pay any principal or failed to invest payment savings successfully when Interest Only option period expired. Their payment would greatly increase unless they refinanced loan at prevailing future interest rates. In addition, having a higher loan to value ratio makes it more challenging to refinance.

Remember that Interest Only option is just that, an option, and can be treated that way, only making lower payments in times of hardship. A nice feature if it doesn't come at considerable added cost. Experienced investors can also leverage lower payments to improve earnings. In summary Interest Only loans are all about cash flow, and flexibility. The new available fixed rate terms give them a welcome predictability, making it even easier for more people to qualify for a loan and own their very own home. Now you are "in know".

* Negative Amortization is when a loan calculates a payment on a low fixed rate but uses an adjusting indexed rate to calculate interest due. If this adjusting indexed rate payment is higher than fixed payment, extra interest is added on to principal loan balance.

This article courtesy of http://www.quicloan.com. You may freely reprint this article on your website or in your newsletter provided this courtesy notice and author name and URL remain intact.