Demonstrate Potential Savings!
Products that are flexible enough to work the loan strategy are called Transactional Loans.
Summary of the Loan Strategy
Transactional Loans have a credit limit, which may be a fixed limit calculated as a percentage of the security value.
Year 1
Year 30
Your Home
Interest Only Credit Limit
Transactional Loans have a credit limit, which may be a fixed limit calculated as a percentage of the security value.
Amortising Credit Limit
Your Transactional Loan
Interest Only Credit Limit
The credit limit may also be the amortisation schedule of a term loan.
Whether the credit limit is fixed or reducing with the amortisation curve, the strategy also operates effectively using non-transactional loans in conjunction with offset accounts.
Year 1
Year 30
Borrowers directly deposit their income into their Transactional Loan.
The balance is reduced upon payment and interest payable is diminished because interest is calculated daily on the loan balance.
Your Income
Interest Only Credit Limit
Year 1
Year 30
Provided they stay within the credit limit of their Transactional Loans, borrowers redraw cash by ATM and complete other transactions online. Cheque and telephone banking may also be made available (i.e. optional).
Your Cash &
Other Payments
via ATM & Internet
Your Income
Interest Only Credit Limit
Year 1
Year 30
A credit card with an interest-free period may also be distributed as part of the strategy.
Borrowers make all possible purchases using the credit card instead of the Transactional Loan to delay redraws from the Transactional Loan. This increases offset savings.
Your Purchases
Credit Card
Your Cash &
Other Payments
Via ATM & Internet
Your Income
Interest Only Credit Limit
Year 1
Year 30
The amount owing on the credit card is paid off on the due date from the Transactional Loan, in which case there's no interest payable on the card.
Your card balance is paid on the due date
Your Purchases
Credit Card
Your Cash &
Other Payments
Via ATM & internet
Your Income
Interest Only Credit Limit
Year 1
Year 30
The result of using the strategy may be substantial savings for borrowers in terms years and dollars.
Transactional Loans have a credit limit, which may be a fixed limit calculated as a percentage of the security value.
In Summary
Mathematically: -
· Funds parked temporarily (i.e. until redrawn for expenses) in the Transactional loan generate offset savings.
· Funds remaining permanently (i.e. not redrawn) in the Transactional Loan become additional repayments.
Why would a lender create this system for its borrowers?
Move to the final slide for the answer.
Borrower’s have the potential to pay off their loans much sooner and enjoy greater freedom in their lives. On the flipside, strategic and financial positives abound for lenders and their distributors and we would be delighted to share our many years of experience with you.
Transactional Loans have a credit limit, which may be a fixed limit calculated as a percentage of the security value.
In regions where Transactional Loans are yet to be developed, we offer you the benefit of hindsight.
Why would a lender create this system for its borrowers?
Happy customers = Product retention = Increased revenue per product and customer.
The success of the loan strategy depends upon borrowers’ expenses and management of their spending (i.e. financial discipline).
Post-settlement, by tracking your borrowers’ actual expenses for comparison against estimates, real loan progress is tracked and borrowers’ gain an understanding of their financial situation, whilst discovering new opportunities to save on specific products (e.g. insurances and utilities).