Self liquidating loan definition
See Also: Loan Agreement Collateralized Debt Obligations When is an interest rate not as important in selecting a loan?Debt Ratio Analysis Debt Service Coverage Ratio (DSCR) The term “self-liquidating loans” is banker slang.Mortgages were originally interest-only loans that needed to be refinanced every five or so years.After the Great Depression, self-liquidating loans became more prevalent due to support from the Federal Housing Administration and the growth of the savings-and-loan industry.It refers to a loan that is used to generate proceeds that are in turn used to repay the loan.
While a self-liquidating loan might cost a little bit more than a mortgage with a balloon or a loan with interest-only payments, in the long run it's the best choice for most situations.Since you will obtain the required collateral and income-producing instruments from the loan proceeds, your credit history does not matter.All you need, is a viable project for which the fall-out from the loan will be used.The repayment schedule and maturity of a self-liquidating loan are designed to coincide with the timing of the assets' income generation.These loans are intended to finance purchases that will quickly and reliably generate cash.
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This page Self-Liquidating Arbitrage Loans (Source: Andrew Scully) You don't have to be rich to get an Arbitrage Loan. Needless to say, you have probably seen hundreds of offers over the past ten to twenty years - but have you been able to get a Self-Liquidating Loan? Because there's many con artists associated with this investment technique. You can get a loan and make money through some arbitrage and hedging.