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Refinance/ restructure asset financing
Rank: Veteran Joined: 6/8/2007 Posts: 675
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Hi Wazuans, We have a situation whereby we need to refinance/ restructure an asset loan we have, so that we pay less per month. We took the original asset finance loan (for a truck) at Faulu, and now they say they can't restructure it! Is that true? I thought all loans can be restructured if all documents are in order? If it can't work with Faulu, could we probably have another institution pay off the loan and give us another loan at a better monthly repayment rate? What do the wazees advise? Form is temporary, class is permanent
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Rank: Elder Joined: 11/5/2010 Posts: 2,459
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anasazi wrote:Hi Wazuans,
We have a situation whereby we need to refinance/ restructure an asset loan we have, so that we pay less per month. We took the original asset finance loan (for a truck) at Faulu, and now they say they can't restructure it! Is that true? I thought all loans can be restructured if all documents are in order?
If it can't work with Faulu, could we probably have another institution pay off the loan and give us another loan at a better monthly repayment rate?
What do the wazees advise?
From experience, most banks are hesitant to go the restructuring route. Ever since that stupid law on capping, asset finance has been the most difficult thing to get. If you know a motor vehicle dealer, talk to them. They keep a tab on which bank has lending appetite. About three months ago, it was only coop, stanbic, NIC and KCB that were willing to touch asset finance. At equity it was a NO NO !!!
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Rank: Veteran Joined: 6/8/2007 Posts: 675
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Oh wow, I thought asset financing was a no brainer since the asset itself is security! Form is temporary, class is permanent
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Rank: Elder Joined: 10/3/2008 Posts: 4,057 Location: Gwitu
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anasazi wrote:Oh wow, I thought asset financing was a no brainer since the asset itself is security! That's why it is risky! Truth forever on the scaffold
Wrong forever on the throne
(James Russell Rowell)
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Rank: Member Joined: 12/17/2016 Posts: 225
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Why would a loan secured by an asset be risky??? Reflection Eternal
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Rank: Elder Joined: 10/3/2008 Posts: 4,057 Location: Gwitu
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Flo-ology wrote:Why would a loan secured by an asset be risky??? The borrower contribution is usually small or sometimes even nil. The asset can be stripped off or misused such that it would be of low value upon repossession. Truth forever on the scaffold
Wrong forever on the throne
(James Russell Rowell)
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Rank: Elder Joined: 3/18/2011 Posts: 12,069 Location: Kianjokoma
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kaka2za wrote:Flo-ology wrote:Why would a loan secured by an asset be risky??? The borrower contribution is usually small or sometimes even nil. The asset can be stripped off or misused such that it would be of low value upon repossession. what about land? Banks wont even give me a lower rate when they charge my land And I'm talking about pre-Njomo Act days
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Rank: Elder Joined: 10/3/2008 Posts: 4,057 Location: Gwitu
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Lolest! wrote:kaka2za wrote:Flo-ology wrote:Why would a loan secured by an asset be risky??? The borrower contribution is usually small or sometimes even nil. The asset can be stripped off or misused such that it would be of low value upon repossession. what about land? Banks wont even give me a lower rate when they charge my land And I'm talking about pre-Njomo Act days Security/collateral is not the major consideration. Capacity to pay is the main thing. Banks will give you money when you prove you don't need it which is actually confirmation of ability to pay. Truth forever on the scaffold
Wrong forever on the throne
(James Russell Rowell)
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Rank: Veteran Joined: 7/5/2010 Posts: 2,061 Location: Nairobi
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Lolest! wrote:kaka2za wrote:Flo-ology wrote:Why would a loan secured by an asset be risky??? The borrower contribution is usually small or sometimes even nil. The asset can be stripped off or misused such that it would be of low value upon repossession. what about land? Banks wont even give me a lower rate when they charge my land And I'm talking about pre-Njomo Act days This. I had eyed an asset in a nice area and wanted financing...everything was in order, the title would be held by the bank till the loan was concluded, proven earnings and track record of repayment, no foreseeable problems in a future, quick disposal of the asset. Bank asked for 18%. I had thought with my fundamentals and attributes of the asset I could get a lower rate (say a 12%), pay it off at an accelerated pace, everyone makes their piece and is left at an advantage. But no, I had deluded myself. The bank wouldn't budge below 18...even when all the convoluted talk of risk didn't make any sense, for my particular case anyway. The greed is rapacious, always has been. It is not just about making profit, banks aren't happy until they have f***ed you in the **** good and proper such that you can pass a fully grown melon - forgive my french. And those who say the Njomo Act has thrown the economy off kilter are perhaps right, I have the common sense to at least concede that point....but personally, they do nothing for me ...it is good that I am not the governor cause with my large chip I would raze the entire edifice to the ground. So let the Njomo Act squeeze things until everything goes up in a fireball, or we all adapt and learn to do things differently. I have nothing to lose.
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Rank: Veteran Joined: 6/8/2007 Posts: 675
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kaka2za wrote:Lolest! wrote:kaka2za wrote:Flo-ology wrote:Why would a loan secured by an asset be risky??? The borrower contribution is usually small or sometimes even nil. The asset can be stripped off or misused such that it would be of low value upon repossession. what about land? Banks wont even give me a lower rate when they charge my land And I'm talking about pre-Njomo Act days Security/collateral is not the major consideration. Capacity to pay is the main thing. Banks will give you money when you prove you don't need it which is actually confirmation of ability to pay. Quite eye opening. I also have this sneaky feeling that the bank's people would gain from defaulting on the loan, so that when they repossess and auction at a low price, they and their contacts can gain. Form is temporary, class is permanent
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Rank: Elder Joined: 2/8/2013 Posts: 4,068 Location: At Large.
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anasazi wrote:kaka2za wrote:Lolest! wrote:kaka2za wrote:Flo-ology wrote:Why would a loan secured by an asset be risky??? The borrower contribution is usually small or sometimes even nil. The asset can be stripped off or misused such that it would be of low value upon repossession. what about land? Banks wont even give me a lower rate when they charge my land And I'm talking about pre-Njomo Act days Security/collateral is not the major consideration. Capacity to pay is the main thing. Banks will give you money when you prove you don't need it which is actually confirmation of ability to pay. Quite eye opening. I also have this sneaky feeling that the bank's people would gain from defaulting on the loan, so that when they repossess and auction at a low price, they and their contacts can gain. Not really.Very few people cherish the thought of buying goods that are on auction more so cars. For the case of declined restructure I think you have failed yo tell us something. 1.Are you up to date with your payments? 2.What is the age of the truck? 3.What is the state of the truck? 4.What is your cash flow at the moment? Answers to the above may give reason why they refused. And note few banks take over loans of Asset Finance i.e Cars and Machinery. Finally take note too that the SGR starts operations in afew months time.Think about its impact on truck business.Banks look at all sides internal and external. Love is beautiful and so are those who share it.With Love, Marriage is an amazing event in ones life time, the foundation of joy, happiness and success.
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Rank: Elder Joined: 3/29/2011 Posts: 2,242
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Flo-ology wrote:Why would a loan secured by an asset be risky??? The asset may not generate the funds to repay the loan hence the risk and need for collateral. There was a trick sometime ago whereby guys would get financed for trucks, do business with them, make good cash and then fail to pay and they are repossessed and auctioned. "Things that matter most must never be at the mercy of things that matter least." Goethe
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Rank: Veteran Joined: 6/8/2007 Posts: 675
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Bigchick wrote:anasazi wrote:kaka2za wrote:Lolest! wrote:kaka2za wrote:Flo-ology wrote:Why would a loan secured by an asset be risky??? The borrower contribution is usually small or sometimes even nil. The asset can be stripped off or misused such that it would be of low value upon repossession. what about land? Banks wont even give me a lower rate when they charge my land And I'm talking about pre-Njomo Act days Security/collateral is not the major consideration. Capacity to pay is the main thing. Banks will give you money when you prove you don't need it which is actually confirmation of ability to pay. Quite eye opening. I also have this sneaky feeling that the bank's people would gain from defaulting on the loan, so that when they repossess and auction at a low price, they and their contacts can gain. Not really.Very few people cherish the thought of buying goods that are on auction more so cars. For the case of declined restructure I think you have failed yo tell us something. 1.Are you up to date with your payments? 2.What is the age of the truck? 3.What is the state of the truck? 4.What is your cash flow at the moment? Answers to the above may give reason why they refused. And note few banks take over loans of Asset Finance i.e Cars and Machinery. Finally take note too that the SGR starts operations in afew months time.Think about its impact on truck business.Banks look at all sides internal and external. The truck in question is a tipper, so SGR not really a factor. State of the truck is good, but issue is the payments are a bit of a stretch, but up to date. With the payments restructured to be less per month by about 50k, everybody will be happy. What can't that happen easily if everyone agrees cost of the loan should go up? Form is temporary, class is permanent
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Rank: Elder Joined: 2/8/2013 Posts: 4,068 Location: At Large.
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anasazi wrote:Bigchick wrote:anasazi wrote:kaka2za wrote:Lolest! wrote:kaka2za wrote:Flo-ology wrote:Why would a loan secured by an asset be risky??? The borrower contribution is usually small or sometimes even nil. The asset can be stripped off or misused such that it would be of low value upon repossession. what about land? Banks wont even give me a lower rate when they charge my land And I'm talking about pre-Njomo Act days Security/collateral is not the major consideration. Capacity to pay is the main thing. Banks will give you money when you prove you don't need it which is actually confirmation of ability to pay. Quite eye opening. I also have this sneaky feeling that the bank's people would gain from defaulting on the loan, so that when they repossess and auction at a low price, they and their contacts can gain. Not really.Very few people cherish the thought of buying goods that are on auction more so cars. For the case of declined restructure I think you have failed yo tell us something. 1.Are you up to date with your payments? 2.What is the age of the truck? 3.What is the state of the truck? 4.What is your cash flow at the moment? Answers to the above may give reason why they refused. And note few banks take over loans of Asset Finance i.e Cars and Machinery. Finally take note too that the SGR starts operations in afew months time.Think about its impact on truck business.Banks look at all sides internal and external. The truck in question is a tipper, so SGR not really a factor. State of the truck is good, but issue is the payments are a bit of a stretch, but up to date. With the payments restructured to be less per month by about 50k, everybody will be happy. What can't that happen easily if everyone agrees cost of the loan should go up? What is the age of the truck? How long have you paid and what is the remaining period? After interest rate capping bank's workings show the longer the period the less profitable the loan.That why most banks are capping period at 36months. Love is beautiful and so are those who share it.With Love, Marriage is an amazing event in ones life time, the foundation of joy, happiness and success.
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Rank: Veteran Joined: 6/8/2007 Posts: 675
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Bigchick wrote:anasazi wrote:Bigchick wrote:anasazi wrote:kaka2za wrote:Lolest! wrote:kaka2za wrote:Flo-ology wrote:Why would a loan secured by an asset be risky??? The borrower contribution is usually small or sometimes even nil. The asset can be stripped off or misused such that it would be of low value upon repossession. what about land? Banks wont even give me a lower rate when they charge my land And I'm talking about pre-Njomo Act days Security/collateral is not the major consideration. Capacity to pay is the main thing. Banks will give you money when you prove you don't need it which is actually confirmation of ability to pay. Quite eye opening. I also have this sneaky feeling that the bank's people would gain from defaulting on the loan, so that when they repossess and auction at a low price, they and their contacts can gain. Not really.Very few people cherish the thought of buying goods that are on auction more so cars. For the case of declined restructure I think you have failed yo tell us something. 1.Are you up to date with your payments? 2.What is the age of the truck? 3.What is the state of the truck? 4.What is your cash flow at the moment? Answers to the above may give reason why they refused. And note few banks take over loans of Asset Finance i.e Cars and Machinery. Finally take note too that the SGR starts operations in afew months time.Think about its impact on truck business.Banks look at all sides internal and external. The truck in question is a tipper, so SGR not really a factor. State of the truck is good, but issue is the payments are a bit of a stretch, but up to date. With the payments restructured to be less per month by about 50k, everybody will be happy. What can't that happen easily if everyone agrees cost of the loan should go up? What is the age of the truck? How long have you paid and what is the remaining period? After interest rate capping bank's workings show the longer the period the less profitable the loan.That why most banks are capping period at 36months. I think I get you now. The truck is 15 months old. So the interest rate cut cuts both ways! Form is temporary, class is permanent
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Rank: Veteran Joined: 8/25/2012 Posts: 1,826
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sometimes I think we are just lazy or clueless, interest rates in teh west are very low compared to kenya and yet the banks there literary hawk credit, hapa kenya its absurd that banks are always crying about this risk thing, given that's the core of banking, its like a doctor refusing to perform an operation because they are afraid the patient will die, I mean the idea is to take the risk and continually innovate and improve your methods or reducing risk, not whining all the time its as if they expect to be paid to do nothing.
end of my rant.
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