Latest / TFS WealthCast / Fast Funding - When to Use, When to Avoid

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Fast Funding - When to Use, When to Avoid · TFS WealthCast

0:17
SPEAKER_02: All right, so season two.
0:20
SPEAKER_02: Today we're gonna be talking about unsecured loans.
0:25
SPEAKER_02: Um I have Nathan from TFS with me.
0:29
SPEAKER_02: Nathan, welcome to the podcast.
0:31
SPEAKER_02: Thank you.
0:32
SPEAKER_02: It's not my first time here, but I'm happy to be back.
0:34
SPEAKER_02: Yeah, it's the first time with me.
0:35
SPEAKER_02: That's right.
0:38
SPEAKER_02: Um, folks, we're gonna talk about unsecured lending, personal, business.
0:45
SPEAKER_02: Um it's pretty much unsecured.
0:48
SPEAKER_02: So let's do this you know in an unsecured way, Nathan.
0:51
SPEAKER_02: What do you reckon?
0:52
SPEAKER_02: Yeah, why not?
0:52
SPEAKER_02: Let's go for it.
0:53
SPEAKER_02: Why not?
0:54
SPEAKER_02: Let's break it down in that way.
0:55
SPEAKER_02: Let's do it.
0:56
SPEAKER_02: Why not?
0:56
SPEAKER_02: Just a little bit of uh background about Nathan.
0:59
SPEAKER_02: Uh Nathan is one of our uh mortgage brokers in TFS, but Nathan comes with a lot of experience in in uh in unsecured lending and secured lending as well.
1:11
SPEAKER_02: He has been a mortgage broker before he he he worked for unsecured lending uh company.
1:17
SPEAKER_02: So yeah, he has a bit of uh bit of knowledge here.
1:20
SPEAKER_02: So I'm gonna I'm gonna test him.
1:22
SPEAKER_02: I'm gonna ask some questions.
1:23
SPEAKER_02: I'm pretty sure he's gonna he's gonna ask me some questions as well.
1:27
SPEAKER_02: So looks like it's gonna be an interesting uh podcast.
1:31
SPEAKER_02: Let's do it.
1:32
SPEAKER_02: Let's do it.
1:32
SPEAKER_02: Let's do it.
1:33
SPEAKER_02: All right, Nathan.
1:34
SPEAKER_02: What is this unsecured loans, man?
1:36
SPEAKER_02: What is it for?
1:38
SPEAKER_01: Who gets these things?
1:40
SPEAKER_01: Let's let's start with the basics, yeah.
1:42
SPEAKER_01: So an unsecured loan, it's it's kind of what it sounds like.
1:46
SPEAKER_01: It's unsecured, doesn't need any property or assets of security, anything like that.
1:51
SPEAKER_01: Um, you know, a lot of lenders will want you to use, you know, your property or a car, something like that, uh, which they would secure against most loans.
1:59
SPEAKER_01: But with unsecured loans, don't really need to worry about that.
2:02
SPEAKER_01: Um on the upside, or really the thing to really watch out for is that lack of security does mean an increased rate.
2:10
SPEAKER_01: I'm sure you've kind of seen that uh the increased rate on a lot of products, right?
2:15
SPEAKER_01: So the rate scores up when you go unsecured.
2:19
SPEAKER_02: That's right.
2:20
SPEAKER_02: So if you're if you're paying about 18, 20, 25, 30, 40, it's pretty much unsecure.
2:27
SPEAKER_01: Yeah, yeah, that's correct.
2:28
SPEAKER_01: Yeah, those those rates are in line, and uh depending on the lender you go to can even be sometimes higher.
2:33
SPEAKER_01: Yeah.
2:33
SPEAKER_01: Um, to be fair, most of the time it's probably around that 25% APR ballpark, depending on the lender, can be more, can be less.
2:42
SPEAKER_01: Um, different lenders have different risk appetites, but you're right, it is around that ballpark when it comes to unsecured funding.
2:49
SPEAKER_01: Uh that's why if you do have the asset and uh you do want a lower rate, it's probably better to go to a you know a secured mainstream bank or something like that, or even uh the smaller fintechs will offer uh secured options as well.
3:03
SPEAKER_02: Yeah.
3:04
SPEAKER_02: Okay.
3:04
SPEAKER_02: So it it's it's a it's a funny thing, Nathan.
3:07
SPEAKER_02: So when a consumer goes and gets a uh personal loan, which is unsecured, yes, most of the time.
3:14
SPEAKER_02: I think 99% it is unsecured.
3:17
SPEAKER_03: Yeah.
3:18
SPEAKER_02: Um, I have seen uh certain types of personal loans are secured against a vehicle you may have in your own.
3:25
SPEAKER_02: Yes, they they do that.
3:26
SPEAKER_02: Yeah, yeah.
3:27
SPEAKER_02: So the rate can slightly come down, but it's not it's not a massive difference.
3:31
SPEAKER_02: That's very true.
3:32
SPEAKER_02: Yeah, yeah.
3:32
SPEAKER_02: Looking at about maybe instead of 15%, probably about 11, 12.
3:37
SPEAKER_01: Yeah, that sounds about right for um those types of loans.
3:40
SPEAKER_01: I think with uh uh using cars as security for personal loans, you see it, it's around that ballpark.
3:45
SPEAKER_01: But uh if they don't have a vehicle that something like that to secure against, yeah, not even talking about personal loans.
3:51
SPEAKER_01: I think personal loans in general unsecure the rates on the higher end.
3:55
SPEAKER_01: Yeah, but if you're looking for you know commercial funding, it's gonna be a lot higher than that.
4:00
SPEAKER_01: Yep.
4:01
SPEAKER_02: See that that's that's the that's the that's where I need to get to this conversation.
4:06
SPEAKER_02: Business owners, right?
4:08
SPEAKER_02: Small to medium uh business owners, they need funding.
4:12
SPEAKER_02: Of course, yeah, right.
4:14
SPEAKER_02: Uh especially if you're in a product-based business, for you to uh you know import uh your your your products to sell in Australia.
4:24
SPEAKER_02: You most likely will be importing it from China or different parts of the world.
4:30
SPEAKER_02: There's a big market there, yeah.
4:31
SPEAKER_02: Right.
4:32
SPEAKER_02: So I've seen quite a lot of unsecure lending in that space.
4:36
SPEAKER_02: Yeah, there is.
4:37
SPEAKER_02: And I don't personally don't see anything wrong with it as long as the business owner has done their numbers right and have a plan to pay it within that time frame.
4:50
SPEAKER_02: In your opinion, what are the worst case scenarios you have seen the business owners taking an unsecured lending, let's say about 200,000 to bring stock?
5:00
SPEAKER_01: What are the nightmares of, you know, why don't you share some well uh it it happens, and I can say it definitely happens.
5:09
SPEAKER_01: I've seen some uh I've seen some situations where, and I won't name the lender, but uh clients have gone to a certain lender uh they've worked with them.
5:18
SPEAKER_01: This lender was very eager to give them uh quite a large loan.
5:23
SPEAKER_01: Um problem is the product that they wanted to buy, they didn't actually have access to that anymore.
5:30
SPEAKER_01: It was sold out.
5:31
SPEAKER_01: So they essentially went to get funding because they thought they needed to move quickly.
5:36
SPEAKER_01: Um, the product wasn't there, and so what happened was they essentially lost out on that.
5:42
SPEAKER_01: They didn't get the product, but most importantly, they couldn't make any profit.
5:45
SPEAKER_01: And so, because of that, the lender actually went to get a uh letter of demand on them and they ended up going down to the collections route with this lender.
5:55
SPEAKER_01: Um, it didn't end uh too well for them.
5:58
SPEAKER_01: So I think you know you make a good point in that those situations do happen, and in order to mitigate that, you really need to be sure before you take out that loan.
6:06
SPEAKER_01: You're dealing with high rates, as well as in the unsecured market, especially business funding, the unsecured market not as regulated as a consumer market.
6:17
SPEAKER_01: The laws that apply to lenders is a lot more relaxed compared to the consumer space.
6:23
SPEAKER_01: So they can, let's say, get away with maybe more uh letter of demands, more demanding in really what they do.
6:32
SPEAKER_01: I I've even heard of a lender taking ownership of the client's uh bank account.
6:38
SPEAKER_01: That's what happened.
6:39
SPEAKER_01: They took ownership because they wanted to make sure that when any money entered that account, they would get paid first before anyone else.
6:46
SPEAKER_01: Recovery positions, right?
6:47
SPEAKER_01: Yeah, exactly.
6:48
SPEAKER_01: Which is uh such a foreign concept, actually, to a lot of people.
6:51
SPEAKER_01: And I'm sure if that person knew that they could potentially lose access to their business bank account and no longer own it at all, um, they probably I'm sure they wouldn't have signed that contract.
7:00
SPEAKER_01: So an interesting point is to uh read over the contract, folks, because there's a lot of things in there you might not realize affect you.
7:07
SPEAKER_01: Interesting.
7:08
SPEAKER_01: Yeah, interesting.
7:08
SPEAKER_02: There you go, folks.
7:09
SPEAKER_02: When you're when you're taking uh unsecured loans for your business, take your time to read the terms and condition as well.
7:17
SPEAKER_02: Yeah, just to you know, for just for yourself to understand what you're signing.
7:22
SPEAKER_02: Something goes wrong.
7:23
SPEAKER_02: It may not be something that you did, it could be many other reasons.
7:28
SPEAKER_02: So that's why we COVID was a big one back then.
7:30
SPEAKER_02: COVID is a big one, things that are out of your control.
7:33
SPEAKER_02: Exactly.
7:34
SPEAKER_02: So so always, you know, read, understand, have a contingency plan as well.
7:39
SPEAKER_02: Um look, if you don't take risks, you can't.
7:42
SPEAKER_02: My opinion is if you don't take risks, if you're a business owner, you can't.
7:48
SPEAKER_02: It's what about survival, you can't win.
7:51
SPEAKER_02: Right?
7:52
SPEAKER_02: No, of course.
7:53
SPEAKER_02: I agree.
7:54
SPEAKER_02: You gotta take risk to win.
7:56
SPEAKER_01: If you don't take risk, you can barely survive, in my opinion.
8:00
SPEAKER_01: And on that point, what do you think the biggest risk you've uh taken early in the career to get TFS to where it is now?
8:06
SPEAKER_02: Oh mate, um luckily I didn't have to go down the path of unsecured borrowing.
8:13
SPEAKER_02: Yeah.
8:14
SPEAKER_02: But then there were unsecured borrowing as a personal loan for our personal matters.
8:19
SPEAKER_02: So now it's all of a sudden I'm I'm working at ANZ, I've got a I've got an income coming every month, or I can't remember the problem, Fortnite, right?
8:27
SPEAKER_02: Um I know that I was earning about 45,000 a year back in that back back in 2007, eight.
8:36
SPEAKER_02: Okay, yeah.
8:37
SPEAKER_02: 45,000.
8:39
SPEAKER_02: Um the moment you go to an entrepreneur lifestyle or starting a business, yeah, now you're not having that fortnight income.
8:49
SPEAKER_02: Yeah, it's it's uh you've got to have something saved up.
8:51
SPEAKER_02: Me and Sonali actually took a as far as I can remember, we we took a personal loan just to cover ourselves for the next six months.
8:58
SPEAKER_01: Right, and well it paid off just in case it paid off in the end, though.
9:02
SPEAKER_02: So umali is that now I trust you.
9:05
SPEAKER_02: Yeah, I know you will you'll you'll do you do well, but in case, yeah, just have have this.
9:11
SPEAKER_02: So we we we did take that, but we didn't use it, Nathan.
9:16
SPEAKER_02: I didn't have to use it, so it's like an overdraft sort of facility, put it that way.
9:21
SPEAKER_02: But then to answer to your question, you're just mitigating certain types of risk by doing those kind of moves.
9:30
SPEAKER_02: Yeah.
9:31
SPEAKER_02: Right now, you know, when you start a business, man, it's it's not that you're working for somebody or you're working in a in a specific uh time frame.
9:40
SPEAKER_02: It's all about what you do for the business that'll produce.
9:45
SPEAKER_02: Right.
9:45
SPEAKER_02: So I was in a I was a uh when I started the business, it's all service.
9:49
SPEAKER_02: I was always I was I have always been in service business.
9:53
SPEAKER_02: So service business is yo, you gotta be available 24-7.
9:59
SPEAKER_02: Right?
9:59
SPEAKER_02: Now, if you want a bigger market share, you gotta be 24-7.
10:03
SPEAKER_02: I mean, to me, I can't work nine to five.
10:06
SPEAKER_02: My my mind doesn't work that way.
10:08
SPEAKER_02: So you built different this time.
10:10
SPEAKER_02: Yeah, built different.
10:11
SPEAKER_02: So it doesn't work for me.
10:14
SPEAKER_02: If somebody tells me you gotta start at 9 and finish at 5, I don't want to work that day.
10:20
SPEAKER_02: I'll probably do something totally different.
10:22
SPEAKER_02: Yeah.
10:23
SPEAKER_02: Um, but work is not a work for me.
10:27
SPEAKER_02: It's like for the business, even the days I started the business.
10:31
SPEAKER_02: I had multiple businesses, by the way.
10:32
SPEAKER_02: When I started this business, I had a gym snowing.
10:37
SPEAKER_02: Really?
10:37
SPEAKER_02: I used to cut grass.
10:38
SPEAKER_02: So again, a service.
10:40
SPEAKER_02: Interesting, yeah.
10:41
SPEAKER_02: But again, even for me, even that one was you know, cut that grass, cut that loan.
10:45
SPEAKER_02: But I mean, I I need to, I want to see that loan looking brilliant, you know, in a way that I would like to go and you know, stay there, have a barbecue, walk around, or lie down on the loan.
10:59
SPEAKER_02: I want, I want that.
11:01
SPEAKER_02: I always did that.
11:02
SPEAKER_02: Sometimes, man, it's it's about a$30 cut.
11:06
SPEAKER_02: It might take me a good 45 minutes to cut it because it's not about money, it's always about the service, how quality you can deliver.
11:16
SPEAKER_02: That's true.
11:17
SPEAKER_02: And what I learned from that point is then that particular client is always asking me, hey, can you come in for the loan again and I'll pay you double?
11:26
SPEAKER_02: Sure, yeah, done.
11:28
SPEAKER_02: 30 becomes 60, and then I can easily ask him, Look, you know my work.
11:33
SPEAKER_02: 30's not gonna cut for me.
11:35
SPEAKER_02: Can you pay me 50 bucks?
11:38
SPEAKER_02: Yep, no worries.
11:40
SPEAKER_02: You just ask and they they give you.
11:42
SPEAKER_02: So that's a service business.
11:43
SPEAKER_02: So service business is all about it's not it's not the time you put in, it's the quality you output to your client.
11:53
SPEAKER_02: Yeah, so that has been like that.
11:55
SPEAKER_02: I I reckon TFS, who we are at this point of time, we're still growing.
12:01
SPEAKER_02: We be I'm not saying we are a grown company, we are nowhere near grown, right?
12:07
SPEAKER_02: So now we are heading into uh leverage because now we want to grow quickly.
12:14
SPEAKER_02: The next level, yeah.
12:15
SPEAKER_02: Yeah, at this level, I'll I'll leverage.
12:18
SPEAKER_02: So whether unsecured lending, man, I don't care.
12:22
SPEAKER_02: Nathan, right now I don't even care whether it's secure lending or unsecured lending.
12:27
SPEAKER_02: You give me the capital, I'll invest, I'll take the return out.
12:31
SPEAKER_02: Because I'm that sure whatever the moves we are doing, there's a return.
12:35
SPEAKER_02: So business owners must understand that.
12:39
SPEAKER_02: Where you are in that playing field.
12:42
SPEAKER_02: If you're a startup, you're not in the playing field to take risk in that aggressive manner.
12:51
SPEAKER_02: You have to take risk, but mitigate it much as you can.
12:55
SPEAKER_01: Yeah.
12:56
SPEAKER_01: Okay.
12:56
SPEAKER_01: If you don't have the big investors backing you, which some startups these days do.
13:01
SPEAKER_01: Yeah, if you're like a self-made startup, you've got to be careful.
13:04
SPEAKER_02: Gotta be careful.
13:05
SPEAKER_02: Yeah.
13:05
SPEAKER_02: You know, don't go and ask for$100,000 when your business can't earn$100,000.
13:09
SPEAKER_03: Exactly.
13:10
SPEAKER_02: Learn exactly what you can, your business can earn, not what you can earn, what the business can earn.
13:16
SPEAKER_02: Can it earn$100,000?
13:18
SPEAKER_02: Then maybe ask for about$30,000,$40,000 maximum.
13:23
SPEAKER_02: Right?
13:23
SPEAKER_02: But then make sure you have a term to pay it, pay it down in five years.
13:27
SPEAKER_02: Don't go and commit yourself for a year, because then you don't have the profit to run for the next year.
13:32
SPEAKER_03: Yeah.
13:32
SPEAKER_02: Right?
13:33
SPEAKER_02: So these are a few little fundamentals as any business owner should understand when you go down the path of unsecured lending.
13:40
SPEAKER_02: It's it's a good way to grow your business, Nathan.
13:43
SPEAKER_02: It's a very, very good way to grow your business.
13:45
SPEAKER_02: If you're paying 16, 20% for$10,000, right?
13:50
SPEAKER_02: In my the way I would calculate, you better have, when you use that$10,000, you better have a 200-200% return.
14:00
SPEAKER_02: Right?
14:00
SPEAKER_02: It's okay to pay 20% from that.
14:04
SPEAKER_01: Well, I mean, look, a lot of people uh assume that when you go to apply for a loan, right?
14:08
SPEAKER_01: Yeah, the lender will run serviceability.
14:10
SPEAKER_01: And then based off their servicing, you know, whether or not you can service a loan, the feasibility of it, right?
14:15
SPEAKER_01: And a lot of lenders do.
14:17
SPEAKER_01: The problem is with the mentality when you assume that the lender will essentially, I've talked to clients and that they kind of assume that the lender, in a way, will find out if them taking out this loan will be profitable for them by like the lender will run the calculations, which is such a crazy thought for me because having worked for a lender and also, you know, aware about how the lenders work, different lenders have different policies.
14:44
SPEAKER_01: And one lender might, you know, kind of like the look of what you're doing.
14:48
SPEAKER_01: They might even see that your business will fail.
14:52
SPEAKER_01: They can still lend to you because you're in a good position right now.
14:55
SPEAKER_01: You know, they won't take into account necessarily the future, you know, your goals and plans like that.
15:01
SPEAKER_01: Not every lender will.
15:03
SPEAKER_01: Most, but not everyone.
15:05
SPEAKER_01: So don't go assuming that the lender will uh necessarily have your best interest in the hearts in terms of the future of your business.
15:13
SPEAKER_01: If you're in a good place right now, you know, they'll see that they'll lend to you, but they're not calculating you know years in the future.
15:19
SPEAKER_01: And taking out that 200k loan now can affect you for a long time.
15:24
SPEAKER_01: So keep that in mind, yeah.
15:26
SPEAKER_02: Yeah, very, very important.
15:28
SPEAKER_02: So there are a few areas I want to I want to cover today, man.
15:31
SPEAKER_02: Um, you know, uh, I think we talked about a little bit about what what best use of it as well, but we'll we'll dive a bit more deep into this.
15:43
SPEAKER_02: Um so I want to touch base things like why do unsecured loans exist?
15:51
SPEAKER_02: Right?
15:52
SPEAKER_02: And then I want to talk about common uses for unsecured loans, loan sizes and terms, right?
16:00
SPEAKER_02: Whether you're gonna go short term, long term.
16:02
SPEAKER_02: Yeah.
16:03
SPEAKER_02: Right.
16:04
SPEAKER_02: Um interest rate we touch base a little bit, but let's let's go a little bit more about interest rate, how to how to use unsecured lending in an effective manner, even though you work harder at a higher rate.
16:16
SPEAKER_02: Yes, right.
16:17
SPEAKER_02: Um how lenders assess a business owner, uh and then what's the best use of it?
16:28
SPEAKER_02: Right.
16:30
SPEAKER_02: I reckon if we can talk about these things, and then finally we can touch based on banks versus fintech lenders, right?
16:36
SPEAKER_02: And that will be something that you can it's interesting, yeah.
16:40
SPEAKER_02: Um I reckon that will be a very, very good set of information for our listeners to understand about unsecured lending, and if you're a business owner, how to use uh that facility to grow your business, right?
16:53
SPEAKER_02: So let's um let's let's start with um uh why do they exist?
17:00
SPEAKER_01: Why do they exist?
17:01
SPEAKER_01: Yeah, why do they exist?
17:02
SPEAKER_01: Well, I mean, uh look, not everyone owns property, right?
17:06
SPEAKER_01: Yeah, so I guess in uh not every situation kind of has a full secured loan option.
17:12
SPEAKER_01: So it's good to have the unsecured option for the people who kind of need those funds quickly without tying up an asset, right?
17:19
SPEAKER_01: Um also the good thing about unsecured loans is you find that you can get faster approvals with unsecured lenders, um, especially the fintech unsecured lenders, a lot faster approvals, uh, less paperwork in a lot of ways.
17:34
SPEAKER_01: Um, depending on the size of the loan, they might get uh property involved, like through maybe PPSR stuff like that.
17:42
SPEAKER_01: But in general, there technically no risk to the property unless you don't pay your loan, then they might come after the property, but uh that's a uh more unlikely upfront if it's not secured.
17:56
SPEAKER_04: So it's some options there.
17:58
SPEAKER_02: If you put a PPSR, but what does it what does it mean?
18:01
SPEAKER_02: What is it is it like okay, if you if my instance was for what whatever the reason you you you couldn't pay them that loan, right?
18:10
SPEAKER_02: And is it gonna be a caveat or is it gonna be registered as a second mortgage at that point?
18:16
SPEAKER_01: So look, generally how does it work?
18:18
SPEAKER_01: It's look the PPSR, which is the personal property securities register, yeah, um, it's like an online database.
18:25
SPEAKER_01: Yep.
18:25
SPEAKER_01: Uh and you essentially the lender will register their interest in, let's say, a car, right?
18:31
SPEAKER_01: So what will happen is um the person will go, uh they'll be able to, let's say, instead of like going into uh arrears like multiple times, they might issue a letter of demand.
18:45
SPEAKER_01: Um, and then what they'll do is they'll put a PPSR, which if they go to sell that vehicle, the lender who has the PPSR on it uh will essentially be paid their owed money, and that's typically uh the collections team that handled that.
19:03
SPEAKER_01: Now, I worked, I guess, with the collection team, but I wasn't in collections, so I'm not 100% familiar with that collections process of it.
19:11
SPEAKER_01: But in general, with the PPSRs, um that'll only happen after you know you've you've uh missed payments and that type of thing.
19:22
SPEAKER_01: Um, but up front, generally lenders won't uh do any type of PPSR up front, but they can um essentially take property as guarantee.
19:32
SPEAKER_01: So some unsecured lenders will take property as guarantee.
19:36
SPEAKER_01: Um so they can kind of lower the rate or feel more comfortable.
19:40
SPEAKER_01: A lot of lenders won't necessarily even lower the rate, they'll just feel more comfortable.
19:44
SPEAKER_01: Like uh, you know, I've seen situations where clients were borderline gonna get the loan, um, probably weren't gonna get it, then they're like, all right, uh, you know, property's available, great, and end up getting a loan that way.
19:57
SPEAKER_01: So having property can help, but it's not a necessity.
20:01
SPEAKER_01: And generally with PPSRs, it comes later in the process if you do go into arrears.
20:09
SPEAKER_02: Okay.
20:10
SPEAKER_02: I hope that explains a little bit about PPSR.
20:14
SPEAKER_02: So it doesn't necessarily work like a second mortgage.
20:23
SPEAKER_02: No, no, no, no, no, no, no, no, no.
20:25
SPEAKER_02: The lender doesn't have that much of power to come and hey, get out of the house.
20:29
SPEAKER_02: We want to get the we want to put the property for sale.
20:31
SPEAKER_02: They they don't have that much of charge over it.
20:34
SPEAKER_02: I I guess ultimately, yeah, it depends.
20:36
SPEAKER_02: But they have a cave they have a very similar level of a caveat.
20:40
SPEAKER_02: If you I would say so, yeah.
20:41
SPEAKER_02: If you to sell it, yeah you have for you to remove the caveat, you've got to pay pay the lender first.
20:48
SPEAKER_01: It's something like that, yeah.
20:49
SPEAKER_01: It's very similar.
20:50
SPEAKER_01: Yeah, yeah.
20:51
SPEAKER_01: Generally PPSRs though, they they come like a lot later in the collections process.
20:56
SPEAKER_01: So um up front, they won't necessarily put a PPSR.
21:00
SPEAKER_01: Uh and I believe in Queensland you can't actually put any form of PPSR on cars or property, as far as I'm aware.
21:10
SPEAKER_01: But I might need to fact check that one.
21:12
SPEAKER_01: I I didn't work in collections, so I'm not too sure about that, unfortunately.
21:16
SPEAKER_02: That's fine.
21:17
SPEAKER_02: So I think that's good information.
21:19
SPEAKER_02: So let's let's let's jump jump into common uses for unsecured loans.
21:25
SPEAKER_02: What have you noticed is the common use?
21:28
SPEAKER_02: I think I've seen quite a number of unsecured lending.
21:32
SPEAKER_02: When I started the business, a lot of people were taking personal loans to go on holidays.
21:39
SPEAKER_02: Weddings.
21:41
SPEAKER_02: Um, and then some weddings is a big one.
21:45
SPEAKER_02: Wedding's a big one, right?
21:46
SPEAKER_02: It's it's it's it's crazy.
21:48
SPEAKER_02: Amount of people they borrow that money for towards weddings.
21:52
SPEAKER_02: The ring as well.
21:54
SPEAKER_02: Oh, yeah, right.
21:55
SPEAKER_02: Oh, yeah.
21:57
SPEAKER_02: So, I mean, look, you know what I mean.
21:58
SPEAKER_02: If you if you're planning on getting married, For the ones for your whole lifetime, maybe it's alright to do it.
22:05
SPEAKER_02: Uh, I don't know, I'm just kidding.
22:07
SPEAKER_02: Now that that's that's one of those unsecured lenses I've seen quite a lot.
22:10
SPEAKER_02: Holidays and these weddings.
22:12
SPEAKER_02: Then also I've seen cars for people to buy cars, modify cars, right?
22:18
SPEAKER_02: Um things like that I've seen quite a lot, right?
22:24
SPEAKER_02: Wow.
22:25
SPEAKER_02: It's crazy.
22:26
SPEAKER_02: And then then you go to all these shopping shopping centers like you know, Harvey Norman, JB Hi-Fi, you know, buy now, pay later.
22:36
SPEAKER_02: That's a big thing, right?
22:38
SPEAKER_02: You buy a laptop which is worth about five, six thousand dollars, you don't even need it, but because it's it's really cool.
22:44
SPEAKER_02: Oh, the new MacBook AM.
22:46
SPEAKER_02: Yeah, and then you go buy it now, pay later.
22:50
SPEAKER_02: Because you want to break down your payments over a period of five years or whatever.
22:58
SPEAKER_02: That's a very common thing here.
23:01
SPEAKER_02: Now, from my perspective, when I see these kind of things, and all of a sudden, in about six months or twelve months later, these customers come to TFS as an example.
23:13
SPEAKER_02: Hey, you want to buy my first home?
23:15
SPEAKER_02: I need to get an investment property.
23:18
SPEAKER_01: Now it's an issue.
23:18
SPEAKER_02: Yep.
23:19
SPEAKER_02: Now it's an issue.
23:20
SPEAKER_02: Can you please get the loan approved?
23:22
SPEAKER_02: We're good to go.
23:23
SPEAKER_02: All right, cool.
23:24
SPEAKER_02: No worries, paying uh unsecure lending there.
23:27
SPEAKER_02: Then you're paying about$700,$500,$300 per month.
23:32
SPEAKER_02: That that that that has an impact of what about$80,000 to some cases at$100,000,$250,000 less borrowing capacity.
23:42
SPEAKER_01: It's it's huge.
23:43
SPEAKER_01: It's huge.
23:44
SPEAKER_02: So now all of a sudden, when you can buy uh a three-bedroom house, now you're looking at buying a piece of dirt.
23:51
SPEAKER_02: Yeah, yeah, yeah.
23:53
SPEAKER_02: I've seen that happen.
23:54
SPEAKER_02: That's the ripple effect on this thing.
23:56
SPEAKER_02: What a lot of people don't understand.
23:58
SPEAKER_02: It's okay to do it, in my opinion, in what I've seen, areas like you know, man, the holidays, man.
24:04
SPEAKER_02: $20,000 on a holiday, I've seen these personal loans happening.
24:07
SPEAKER_02: Yeah, yeah, yeah.
24:08
SPEAKER_02: It's a big market.
24:09
SPEAKER_01: Yeah, definitely is.
24:11
SPEAKER_02: But when you don't have a plan to pay these$20,000 back, don't do it.
24:17
SPEAKER_01: A lot of people don't make that plan, you know, they just kind of see the holiday and then they just want to go for it.
24:22
SPEAKER_01: And then they want to buy a house later.
24:24
SPEAKER_01: And as you said, it's it's very much a ripple effect, you know.
24:27
SPEAKER_01: A lot of lenders will look at that debt.
24:28
SPEAKER_01: Yeah.
24:29
SPEAKER_01: Um, it also just adds something that potentially, if you start making missed payments, now when you go to uh buy a house, credit score goes down.
24:37
SPEAKER_01: Exactly, it affects that.
24:38
SPEAKER_01: And um it's that really that ripple effect can be devastating long term.
24:44
SPEAKER_02: I mean your credit score is down.
24:45
SPEAKER_02: If credit scores go down to I don't know, less than 500, you're looking at when you can pay a five and a half to you know, let's say five and a half percent interest rate when you can't pay that because your credit score is less than 500, now you're paying about seven and a half.
25:01
SPEAKER_01: It's uh it's a huge difference.
25:03
SPEAKER_01: And uh to the listeners, you know, it might not sound that different, but it's huge.
25:06
SPEAKER_01: It's huge, right?
25:07
SPEAKER_02: So yeah, but the best use of people I've seen the unsecured lending business owners.
25:13
SPEAKER_02: Um business owners, I've seen them using it in a you know in a most effective manner because they I think they understand, okay, I'm getting a$50,000 to buy this equipment as an example.
25:25
SPEAKER_02: Uh, cleaners, I've seen quite a number of uh cleaning companies getting unsecured lending to buy uh uh an asset because they may not know that they can do asset finance.
25:35
SPEAKER_02: This happens a lot.
25:36
SPEAKER_02: So they go personal loan or you know, overdraft or whatever, go and buy a$50,000 equipment.
25:42
SPEAKER_02: But these guys understand, okay,$50,000 equipment is gonna give me about$150,000 revenue in the next six months.
25:49
SPEAKER_01: Exactly, exactly.
25:50
SPEAKER_01: The business owners really do understand the uh the fact that I and I think that what that comes down to is there is a direct tie between this loan and them making money.
26:00
SPEAKER_01: Yeah, so there's obviously gonna be a difference between the business owners and the the person who just wants to go to, I don't know, Croatia on a holiday, so now they take out a personal loan.
26:09
SPEAKER_01: Bali is a common area.
26:11
SPEAKER_01: Yeah, yeah, yeah.
26:11
SPEAKER_01: I was thinking Bali, but I was thinking, you know, let's think somewhere in uh maybe Europe that's uh gonna need but even the Bali is gonna cost you at least 10k, right?
26:20
SPEAKER_02: If you're gonna get uh I don't know about that.
26:22
SPEAKER_01: Uh Bali, Bali in Thailand is relatively cheap.
26:26
SPEAKER_01: What do you reckon?
26:27
SPEAKER_01: Like four or five K, I'd say on average.
26:30
SPEAKER_01: I'm not that's not.
26:31
SPEAKER_01: That's why I said like Croatia or like someplace in Europe, you know, you're gonna be looking at like 15 grand, maybe 10, 15 grand.
26:37
SPEAKER_01: Wow, okay.
26:38
SPEAKER_01: Uh but like obviously depends on when you go, depends on all these things.
26:42
SPEAKER_01: But yeah, I'd say Bali is something they're pretty cheap in comparison.
26:45
SPEAKER_01: Bali's cheap, okay.
26:46
SPEAKER_01: 5k.
26:47
SPEAKER_01: Yeah, it's not a good thing.
26:48
SPEAKER_01: I mean, 5k maybe on the higher end, to be honest.
26:50
SPEAKER_01: Oh, really?
26:51
SPEAKER_01: Yeah.
26:51
SPEAKER_02: How much is the ticket?
26:53
SPEAKER_01: Uh from Melbourne to Bali.
26:54
SPEAKER_01: I'm not too sure, maybe like 1.6 return.
27:00
SPEAKER_01: 1,600?
27:01
SPEAKER_01: Yeah.
27:01
SPEAKER_01: Return.
27:02
SPEAKER_01: I think so, yeah.
27:03
SPEAKER_02: And then you got about you get a$5,000.
27:05
SPEAKER_02: That that that$3,000.
27:07
SPEAKER_01: That's that's$5,000, including the ticket.
27:09
SPEAKER_01: Yeah, right.
27:09
SPEAKER_02: So if you got a$3,400 left, is that enough?
27:12
SPEAKER_01: Yeah, yeah.
27:13
SPEAKER_01: For a two-week holiday in Bali, it would be.
27:15
SPEAKER_01: No way.
27:15
SPEAKER_01: Yeah, it is.
27:16
SPEAKER_01: It's very, very, very cheap though.
27:18
SPEAKER_01: Yeah.
27:18
SPEAKER_01: The cost of living.
27:19
SPEAKER_01: It's uh really this is a revelation for you.
27:22
SPEAKER_01: For you, uh, and maybe gonna open an office in Bali soon, you know.
27:25
SPEAKER_01: We can go there.
27:26
SPEAKER_02: Man, 3,400 for two weeks, you mean?
27:30
SPEAKER_01: Yeah, yeah.
27:30
SPEAKER_02: No way.
27:31
SPEAKER_01: Yeah, look into it after the podcast.
27:33
SPEAKER_01: You know, we need we need we need we need like a Jamie or something to look this up, you know.
27:37
SPEAKER_02: So beachfront, you know, good hotels or whatever.
27:41
SPEAKER_02: Yeah, all right, that's interesting.
27:43
SPEAKER_02: I'm gonna have a look at that.
27:44
SPEAKER_02: Yeah, look into that uh because uh it's pretty cheap.
27:47
SPEAKER_02: I think we got sidetracked a little bit when the barley came into play, but but but you know, coming back to the the the holidays, like you said, if you're going to Croatia, you know, uh Euro trip, that's gonna cost you.
27:58
SPEAKER_02: Yeah, that's when it costs it's gonna cost you a lot.
28:00
SPEAKER_02: Yeah, um, so so it is important for you to have a plan.
28:05
SPEAKER_02: But if you're a business owner, understand exactly what you're using it for.
28:09
SPEAKER_02: Make sure you have a better revenue stream to pay that off.
28:13
SPEAKER_02: Look, if you're a business owner, rather than getting a personal loan, maybe consider an overdraft facility or on asset finance if we're getting assets, that's a better way.
28:23
SPEAKER_02: Uh, I I would I would say, um, Nathan, would you agree that will be a better way to do it?
28:28
SPEAKER_01: Yeah, I I think for the most part, you know, if your goal is to improve cash flow, you don't need the lump sum up front to go with uh you know an unsecured line of credit.
28:36
SPEAKER_01: Um, but in general, like you'd probably uh if you need like equipment finance, you can kind of secure it.
28:44
SPEAKER_01: But yeah, I I'd say going for an unsecured line of credit would probably be what you want to look for in those situations, yeah.
28:50
SPEAKER_02: Yeah, yeah, yeah.
28:51
SPEAKER_02: All right, let's let's dive into loan sizes and terms.
28:54
SPEAKER_02: It's an interesting one.
28:56
SPEAKER_02: So shorter terms you get less interest overall, but then you go longer terms, you're you're you're lowering your repayments.
29:06
SPEAKER_02: Yeah.
29:06
SPEAKER_02: How does that work?
29:07
SPEAKER_02: I know your previous previous employer where you were were working, you had a lot of short terms and and I would say mid-term sort of thing.
29:17
SPEAKER_01: Yeah, it was like two two to three years, three years max.
29:19
SPEAKER_01: Yeah, yeah.
29:20
SPEAKER_01: Three years max.
29:21
SPEAKER_01: So it would be uh it would be um considered short term.
29:24
SPEAKER_01: Uh, but it's not like super short term.
29:27
SPEAKER_01: I think look, the longer you hold uh a loan for let's say you can take out a personal loan for seven years and you'll pay maybe four hundred dollars a month, right?
29:41
SPEAKER_01: Over seven years, four hundred dollars a month.
29:43
SPEAKER_01: If you take it that same loan amount for let's say two years, that could could jump up to I'd say close to probably two years, high interest rate, close to maybe a grand a month, even.
29:56
SPEAKER_01: Uh it feels like a one year, two years, yeah, it's significantly higher.
29:59
SPEAKER_01: Yeah.
30:00
SPEAKER_01: Because your monthly repayments go up because there's a lot less time to repay it.
30:04
SPEAKER_01: So high interest rate plus a lot less time, your monthly repayments are going to be high.
30:09
SPEAKER_01: That's why a lot of people kind of choose a longer loan terms.
30:12
SPEAKER_01: Yeah.
30:13
SPEAKER_01: And uh some lenders will even let you pay off the loan amount before the full term runs.
30:21
SPEAKER_01: You end up actually saving interest.
30:23
SPEAKER_01: So if you choose the longest loan term with the smallest monthly repayment, then you get, you know, your business is doing well, you get a nice lump sum from somewhere, and uh you pay it off.
30:34
SPEAKER_01: You actually save interest doing it that way, save money doing it that way, then taking it over a shorter time.
30:44
SPEAKER_02: Okay, okay.
30:45
SPEAKER_02: So you you you would say take it to the longest possible term.
30:51
SPEAKER_01: Yes, most cases, and I'd say 90% of cases, yeah, take the longest term that they offer you and pay it off as soon as you can.
31:00
SPEAKER_01: So I'm saying like and and what think of it like it's a two-year loan term, but you're actually taking a seven-year loan term.
31:07
SPEAKER_01: Yeah.
31:07
SPEAKER_01: And then depending on the lender, they might have like uh some type of break cost or some type of fee there, yeah, which you'd pay if you don't go the full amount.
31:15
SPEAKER_01: So what you just need to do is the calculations for if it would be worth it for you to pay it off early.
31:22
SPEAKER_01: Because a lot of times what you'll find if you do the maths, yeah, you you do end up paying the break fee, but you still end up paying less than you would if you see that through.
31:30
SPEAKER_01: Yeah.
31:30
SPEAKER_01: And if you were to have taken the two-year term.
31:32
SPEAKER_01: What's a typical break break fee?
31:36
SPEAKER_01: It's hard to be honest, it's hard to say because some lenders charge a standard like break fee.
31:42
SPEAKER_01: Yeah.
31:43
SPEAKER_01: Other lenders will charge based off the percentage of the loan you have left.
31:47
SPEAKER_01: Okay.
31:47
SPEAKER_01: And that would be also dependent on how much you take out.
31:50
unknown: Yeah.
31:50
SPEAKER_01: So there's a lot of factors there.
31:52
SPEAKER_01: It's kind of hard to give one specific answer for it.
31:54
SPEAKER_01: But generally, it's it's a common just to give you an idea, it's a combination of the time left, uh, the total loan like term, let's say it's seven years, you break it after three years, is a time left plus the loan amount left, something like that, they would generally calculate that, and that can change.
32:11
SPEAKER_01: And not only does that change based off of uh the lender, but within the lender, sometimes those terms can change as well.
32:21
SPEAKER_01: One person might get different terms than someone else.
32:23
SPEAKER_01: Uh-huh.
32:23
SPEAKER_01: So just it's important to look at that's that's that's a risk.
32:26
SPEAKER_02: Yeah, yeah.
32:27
SPEAKER_02: So the risk profile, yeah.
32:28
SPEAKER_01: It's one of the things you should always look into.
32:30
SPEAKER_01: Crack, yeah, the risk profile.
32:31
SPEAKER_01: Yeah.
32:31
SPEAKER_02: Yep.
32:32
SPEAKER_02: Yep.
32:32
SPEAKER_02: Okay.
32:33
SPEAKER_02: All right.
32:34
SPEAKER_02: So, so, okay.
32:35
SPEAKER_02: Yeah, so so so basically, folks, when you're taking uh unsecured lending, read the terms and condition.
32:45
SPEAKER_02: Super important, yeah.
32:46
SPEAKER_02: Very, very important.
32:48
SPEAKER_02: Get seven, get seven years of maximum long term that you can, whatever it is, yeah.
32:52
SPEAKER_02: But when you're taking the maximum long term, make sure that you understand how to exit before what are the uh costs involved.
33:00
SPEAKER_01: Always ask about that.
33:01
SPEAKER_01: What are the costs involved?
33:02
SPEAKER_01: A lot of people they they want to exit before the end of their loan term, they realize, oh wait, I'm gonna be slugged with like a$2,000 you know exit fee.
33:10
SPEAKER_01: And sometimes if you do the maths, you can find out it is worth it to do that.
33:15
SPEAKER_01: Um, but a lot of the times it might not be.
33:18
SPEAKER_01: So that's very case dependent on your situation.
33:20
SPEAKER_01: Yeah, yeah.
33:21
SPEAKER_02: So it's a it's it's a typical um typical loan.
33:25
SPEAKER_02: If you take$25,000, 21% interest rate or 20% interest rate over seven years term, you're looking about$400,$400 per per month repayment.
33:36
SPEAKER_02: So you're looking at what 60 months rather than 24 months, 84 months repayment term, including your your interest, right?
33:44
SPEAKER_02: So you know, if you if you if you grab the loan for the whole seven years, you're looking at about$33,000,$34,000 of total repayments, including the principal.
33:54
SPEAKER_02: Now, if you break it, you know, you used it correctly, you got the money, and and and you know, now you've already gone up about, I would say, you know, you're you're you're literally another$22,000 you're paid for increasing interest to exceed your your you know, you could have extra repayment, or maybe you could have another another five thousand to six thousand dollars of principal to pay and another interest interest component to go.
34:24
SPEAKER_02: So altogether, your if you if you can pay the whole$25,000 and pay another extra two thousand dollars, it's actually worth it rather than go going down the path of 33%.
34:33
SPEAKER_02: Exactly.
34:34
SPEAKER_02: Exactly.
34:34
SPEAKER_02: That's the logic.
34:35
SPEAKER_02: That's what you're trying to expect.
34:37
SPEAKER_02: So, guys, what Nathan trying to explain is you you need to understand and read the the terms and condition of the exit closes that you have.
34:47
SPEAKER_02: Typically, it sometimes it's cheaper to pay that exit fee rather than staying over seven years.
34:53
SPEAKER_02: Now, I can flip it the other way in a business perspective.
34:58
SPEAKER_02: Look, if it's only gonna you've already costed it 33,000 to your your your costings, right?
35:04
SPEAKER_02: Now your your cash flow.
35:05
SPEAKER_02: Your cash flow.
35:07
SPEAKER_02: So you're gonna think about it.
35:08
SPEAKER_02: If you got the money, the money's already flowing in, now go and reinvest it, earn more money.
35:12
SPEAKER_02: Exactly.
35:13
SPEAKER_02: Uh yeah, because it costs it.
35:14
SPEAKER_01: And you know, at the end of the day, it comes down to preference, right?
35:17
SPEAKER_01: Yeah.
35:18
SPEAKER_01: Um comes down to what I like to say, it's you know, individual circumstance, look over your contract, think about the best thing to do for you.
35:24
SPEAKER_01: Yeah.
35:25
SPEAKER_01: Um but you're right, you know, sometimes actually keeping it might be more beneficial for you than paying the lump sum.
35:32
SPEAKER_01: Yeah.
35:33
SPEAKER_01: So it really just depends on the situation.
35:34
SPEAKER_01: Yeah.
35:35
SPEAKER_01: I guess it's important to not get complacent, and it's important to at least figure out which camp you sit in.
35:42
SPEAKER_01: You know, like are you gonna keep it or you're gonna get rid of it?
35:45
SPEAKER_01: A lot of people don't, that thought doesn't even cross their minds.
35:48
SPEAKER_01: They just keep it the entire time, but that might not be the best thing to do.
35:51
SPEAKER_01: Okay.
35:51
SPEAKER_02: So depending on your circumstances as well, you know, if you're planning on buying a property for your your business or or even for yourself, if that is going this this liability is is is not giving you an extra hundred thousand dollars.
36:05
SPEAKER_02: That's an issue, yeah.
36:06
SPEAKER_02: You know, that's an issue, you know.
36:08
SPEAKER_02: Maybe then it's it's okay to pay that 33,000 or whatever uh exit exit fee amount that you need to pay and get out of it, borrow that extra hundred thousand to buy what you need to buy, because you're buying end of the day, it's bricks and mortar.
36:22
SPEAKER_02: So in Australia, if you're buying bricks and mortar, it's always going up.
36:25
SPEAKER_02: Very successful in Australia.
36:26
SPEAKER_02: Yeah, yeah.
36:28
SPEAKER_02: Um, so so over the long term, you'll see at least about a good 30%, 25% uh uh growth of that property.
36:36
SPEAKER_02: Uh if you if you hold it for uh a good good good good period of time.
36:40
SPEAKER_02: I mean, there's a there's a saying saying, you know, it's uh you buy a property in every 10 years it doubles in value, right?
36:47
SPEAKER_02: Yeah, and to a certain degree is true.
36:50
SPEAKER_02: So so sometimes you have to also wait and see, all right, maybe I'll pay the unsecured loan now, I'll get it later, but let me go and buy my property or buy that investment property as well.
37:00
SPEAKER_02: So that might even you have to make make your uh decision like that.
37:05
SPEAKER_02: Yeah.
37:05
SPEAKER_02: Right.
37:06
SPEAKER_02: So coming back to uh so that that that that that's a very good information, short uh shorter terms versus longer terms.
37:14
SPEAKER_02: Um interest rates.
37:17
SPEAKER_02: Interest rates, man.
37:19
SPEAKER_02: I think this is this is something that everybody moment they see unsecured loan, rate is 22%, 18%, they were like, oh my god, that's too expensive, I don't want it.
37:32
SPEAKER_02: Yeah, I've I've heard that.
37:34
SPEAKER_02: I've heard that a lot.
37:35
SPEAKER_01: Yeah, they definitely do say that.
37:38
SPEAKER_01: Well wait well what do you have to say about it, man?
37:42
SPEAKER_01: Look, yeah, at the end of the day, a lot of people do think like that.
37:47
SPEAKER_01: And like generally with unsecured loans, they do come with a higher interest rate.
37:50
SPEAKER_01: Uh, because there's a lot of things tied to that.
37:53
SPEAKER_01: People think, you know, home loan rates, you know, people go into oh, I need I need let's say 200,000, I'm gonna get like 7% interest, you know.
38:01
SPEAKER_01: That's what they're expecting.
38:04
SPEAKER_01: Especially if they go to a fintech, they're not gonna get home loan rates or bank rates, right?
38:10
SPEAKER_01: So there is more risk to the lender not being asset backed.
38:15
SPEAKER_01: So because of that, you're gonna have much higher rates, right?
38:18
SPEAKER_01: That's where the risk is.
38:19
SPEAKER_01: The lender is taking on the risk to give you the money without any type of really asset there.
38:24
SPEAKER_01: You have to expect the rate to be higher.
38:26
SPEAKER_01: And if you need funding quickly, then going the unsecured route would probably be the fastest way you can do it.
38:34
SPEAKER_01: Um, so it is dependent on on your situation.
38:37
SPEAKER_01: Ultimately, I think going into it with the mentality that you're gonna get home loan rates, it's not gonna happen.
38:43
SPEAKER_01: No.
38:43
SPEAKER_01: Um, they're not built like that.
38:45
SPEAKER_01: That's secure, that's secure lending.
38:47
SPEAKER_01: Yeah, exactly.
38:48
SPEAKER_01: But you know, you'd be surprised the amount of people I've talked to that uh they expect bank rates, they expect home loan rates on an unsecured product for their business loan.
38:56
SPEAKER_01: Um sometimes they'll come around and they'll realize that it's uh you know in their best interest to do that, and they kind of understand why.
39:04
SPEAKER_01: A lot of people don't.
39:05
SPEAKER_01: So I guess it's important to educate yourself on the difference and why it is significantly higher, and then make the decision if it's worth it for you and your business to uh grow your business to take on that higher debt, that higher interest rate, than going the secured route or you know, expecting a home loan rate, it's just not gonna happen.
39:26
SPEAKER_01: Absolutely.
39:27
SPEAKER_02: I mean, folks, you gotta understand if you go to fintech, their cost of funding is far greater than banks' retail lending.
39:38
SPEAKER_01: Very correct.
39:39
SPEAKER_01: A lot of people don't think about that, that the fintechs get their funding from someone else, and they have to pay for it.
39:45
SPEAKER_01: Yeah.
39:46
SPEAKER_01: So they have to pay for it, yeah.
39:47
SPEAKER_02: As an example, they they might have a 20 million in their portfolio to lend, and that 20 million they have borrowed at about seven and a half, eight percent.
39:59
SPEAKER_02: So they're running a company, they're running a business, and they're taking high risk as well, lending to certain types of individuals.
40:07
SPEAKER_02: So they gotta make their margin.
40:09
SPEAKER_02: So margins come in with cost, right?
40:12
SPEAKER_02: So don't expect fintech to give you nine percent rate, that won't work.
40:19
SPEAKER_02: It's not a business, it's not a sustainable business model for fintech.
40:22
SPEAKER_02: Yeah.
40:24
SPEAKER_02: So so banks can do it, as you all know.
40:26
SPEAKER_02: Reserve Bank of Australia always put the cash rate, right?
40:30
SPEAKER_02: I mean, that's a bit of an indication for you what sort of rates the banks are borrowing at, right?
40:35
SPEAKER_02: So so you can see why the banks can lend you even at an unsecured lending perspective, it'll be cheaper than a fintech.
40:44
SPEAKER_02: But if you really look at it, you go to banks like major banks, we've got four major banks in in Australia, Westpac, ANZ, right, because CBA, NAP, you want to go and get an unsecured lending from them.
41:00
SPEAKER_02: You hardly get a rate in single digits unless your credit score is like top-notch.
41:07
SPEAKER_02: Yeah.
41:07
SPEAKER_02: And you you know you have enough assets to back that lending.
41:12
SPEAKER_01: Not only that, but uh with those lenders, those banks, it takes a very long time.
41:16
SPEAKER_01: The turnaround time when it comes to lending is business lending, is a lot of documents.
41:22
SPEAKER_01: We're talking weeks, they'll ask me a month or something what you ate last last night as well.
41:27
SPEAKER_02: Exactly, exactly.
41:30
SPEAKER_02: They'll ask, they'll ask for the thing.
41:32
SPEAKER_02: They ask, they ask.
41:34
SPEAKER_02: So it'll it'll it'll take time.
41:36
unknown: Yeah.
41:37
SPEAKER_02: Um, but but again, if you look at the if you look at the difference um between you know, you you go down this path of giving all the documentation, giving everything to the bank two, three weeks later, get a loan approved, your rate is about 13.99%.
41:55
SPEAKER_02: Well, fintech would have given you 16% two weeks ago.
42:00
SPEAKER_02: Exactly, yeah.
42:01
SPEAKER_02: Right.
42:02
SPEAKER_02: So so we gotta understand the the importance of that.
42:07
SPEAKER_02: Um so when you go when you want quick lending, fast approvals, less questions, less hassles, fintech is the way to go, but understand their cost of funding is far greater than banks, so their rate is gonna be a bit higher than the banks.
42:26
SPEAKER_02: You want a lower rate, of course.
42:28
SPEAKER_02: The major banks are there and they'll take the time.
42:31
SPEAKER_02: But if you're good, if you're a good client, they'll give it to you.
42:35
SPEAKER_01: That's true.
42:35
SPEAKER_01: That's true, yeah.
42:36
SPEAKER_01: But you gotta have the patience.
42:37
SPEAKER_01: Yeah, and I I think you make a really good point about the um the cost of funding.
42:41
SPEAKER_01: A lot of people genuinely don't even think about that when it comes to fintechs, that they're getting their funding from somewhere, that they are essentially, in a way, getting a, I guess you could say a loan from somewhere to give to you.
42:53
SPEAKER_01: Okay, right?
42:54
SPEAKER_01: And they they're having to pay an interest on that, and you know, they're having to pay on that, and whatever agreements they might have, you know, who knows?
43:01
SPEAKER_01: But um it's a very you make a very good uh point.
43:04
SPEAKER_01: People don't even think about that when it comes to fintechs.
43:06
SPEAKER_01: They generally, generally, not all of them, but generally they have funders that give them the funds.
43:13
SPEAKER_01: Uh some fintechs do have their own funds that they hold.
43:16
SPEAKER_01: Yep.
43:16
SPEAKER_01: Uh, but for the most part, you're right.
43:18
SPEAKER_01: And it's um that plays a big role in interest rates.
43:21
SPEAKER_02: Yep.
43:23
SPEAKER_02: Even though the fintechs own their own funds, they still have a cost of funding.
43:28
SPEAKER_02: Well, exactly.
43:29
SPEAKER_02: The cost for it, right?
43:30
SPEAKER_02: They can invest that in a you know manage uh super manage manage fund and earn about 10 to 12 percent.
43:36
SPEAKER_02: Exactly.
43:36
SPEAKER_02: Right.
43:36
SPEAKER_02: Giving it to you 8% doesn't make any sense to them.
43:39
SPEAKER_02: Yeah, yeah.
43:40
SPEAKER_02: So we gotta think about it from that perspective as well.
43:43
SPEAKER_02: So um for any any anything when it comes to money, there is a cost for it.
43:50
SPEAKER_02: Exactly.
43:50
SPEAKER_02: That's why they've created this commodity called money.
43:54
SPEAKER_02: That's why finance exists.
43:56
SPEAKER_02: Yeah.
43:57
SPEAKER_02: Otherwise we can go to the barter system, you know, very I think you can you can have my old uh fifteen iPhone and give me your laptop.
44:06
SPEAKER_02: Okay.
44:08
SPEAKER_02: Things like that can exist.
44:09
SPEAKER_02: But uh we are we are in a we are in a environment where uh the commodities like money and and there's crypto, there's another another subject altogether.
44:17
SPEAKER_02: I'm not the best person to it, but obviously we can get one of the guys who knows about crypto to come to this podcast and and enlighten us about it as well.
44:26
SPEAKER_02: But these are these are commodities that that exist in in our current era.
44:31
SPEAKER_02: Um so so we have to understand when we go and ask unsecured lending, there's a cost for it.
44:37
SPEAKER_02: So whether you want faster proofs and quick quick quick money for you to go and invest and invest your business or for your purpose, you gotta be ready to pay pay the cost.
44:49
SPEAKER_02: Exactly.
44:50
SPEAKER_02: Um it gets passed on to you at the end of the day.
44:52
SPEAKER_02: Absolutely.
44:53
SPEAKER_02: So that's why that's why we want we want you all to know, you know, read your terms and conditions, understand.
44:59
SPEAKER_02: Right?
44:59
SPEAKER_02: It's it's not just getting that$40,000 to to you know marry your wife or you know, uh buy that ring or whatever.
45:07
SPEAKER_02: It's not just about it.
45:09
SPEAKER_02: It's always understand what what what what you're signing for, right?
45:12
SPEAKER_02: What are these terms and conditions?
45:14
SPEAKER_02: How can you get out of it?
45:15
SPEAKER_02: Do you have a plan to pay these repayments monthly?
45:18
SPEAKER_02: What's that plan looks like?
45:20
SPEAKER_02: You know, if if if if by any chance, if you you you if you're in the middle of you know, in between jobs, how does that uh look like to you?
45:28
SPEAKER_02: Right?
45:29
SPEAKER_02: There are ways that you can mitigate risk.
45:31
SPEAKER_02: Um you know, we we always try to help our clients to understand the risk and help them uh to a path where if something goes wrong, these are the things you've got to be able to do.
45:43
SPEAKER_02: So we you know, those things are very important for you to understand.
45:46
SPEAKER_01: For sure, because you know, the high interest rates, you know, it does mean you don't want to stretch the out the loans out over long term unless it does make sense.
45:55
SPEAKER_01: Because you know, any missed repayments impact your credit file much faster compared to secured loans.
46:01
SPEAKER_01: I think you know, as a final point, it's important to um know that when you do use them correctly, they can improve the cash flow.
46:09
SPEAKER_01: Absolutely and you know, reduce the kind of stress that you might have.
46:13
SPEAKER_01: Uh, but if you do use it poorly, they can become expensive unsecured loans.
46:17
SPEAKER_03: Yeah, yeah, yeah.
46:18
SPEAKER_01: It'll it'll hurt you.
46:19
SPEAKER_01: Yeah.
46:19
SPEAKER_02: It'll hurt you.
46:20
SPEAKER_02: Yeah.
46:21
SPEAKER_02: So so if you're a business owner, unsecure lending is very good.
46:25
SPEAKER_02: Have a plan and make sure it has a purpose for it.
46:28
SPEAKER_02: So if you if you're planning, again, I'm gonna repeat myself here.
46:31
SPEAKER_02: If you if you're gonna borrow at 20%, make sure you're gonna have about 200% return on that when you invest.
46:38
SPEAKER_02: So that that's for you business owners, so make sure you you you do those numbers before you go and get that money.
46:44
SPEAKER_02: Um, I think that was a great, great, great, great um episode, uh Nathan.
46:48
SPEAKER_02: Nathan, thanks, thanks for coming, man.
46:50
SPEAKER_02: No problem.
46:50
SPEAKER_02: Uh we'll do a bit more, uh, things like this.
46:53
SPEAKER_02: Let's do it, man.
46:54
SPEAKER_02: Uh, probably a secure lending.
46:56
SPEAKER_02: Um, we we can talk about the business, business lending, the commercial lending, what what types of uh properties uh you can buy as a business owner and how to build commercial property and pyers.
47:09
SPEAKER_02: Right.
47:09
SPEAKER_02: Um, things like that, the leveraging side of it.
47:12
SPEAKER_02: Right.
47:12
SPEAKER_02: So, Nathan, thank you so much.
47:14
SPEAKER_02: Uh listeners, thank you for listening to us again.
47:16
SPEAKER_02: And uh we as as always stay tuned for the next episode.
47:20
SPEAKER_02: See you guys, take care.
47:23
SPEAKER_00: Thank you for tuning in to another episode of the TFS Podcast, where we turn knowledge into action and big goals into real results.
47:33
SPEAKER_00: Now, don't forget to like and subscribe and share this episode with someone working towards their next financial step.
47:42
SPEAKER_00: Now, with that being said, until next time, keep building.