Questions And Answers
Project Merlin (Recalling bank over drafts)
asked by Nicholas Bailey posted 1 Years ago at 13:26
I have a friend who banks with the Woolich for his mortgage of £53,000 he is 63 years old, also he has a £30,000 over draft with Barclays , which he tells me the bank want to take a charge on his property for. Am I right in thinking that they can't force him to make repayments on this over draft, but just keep it as a charge on the house? Ideally he needs another £10,000 he says to keep trading, Does any one have any suggestions. Property value well it's on the market for £360,000 but in this market I am not so sure if it's more like £300,000.
1-2 of 2 Answers
Trevor Allsop answered 1 Years ago at 16:52First of all I would avoid at all costs the charge on your friends property. I have personal experience with this strategy from the Banks. Some years ago my business went into liquidation, the Bank had a charge on my property. The Bank was not owed any money whatsoever and it took 3 letters and many phone calls for them to lift the charge on the property.
An overdraft can be "pulled" or recalled at any time by the Bank, unlike a loan which has a fixed term and fixed or fluctuating payments.Get your friend to have a loan for the extra £10K. Short term lending ie overdraft for long term funding is wrong. Go for long term lending i.e loan over fixed term, for long term funding that way the Bank cannot "pull the rug" so easily as they do to hundreds of small businesses when the going gets tough.
Paresh Shah answered 1 Years ago at 9:53Normally banks will only do £25,000 unsecured, your friend has been lucky. The overdraft is a temporary arrangement and can be recalled at any time. Best option is to get a loan but by the sounds of this the business may have issues so only option is to get a secured loan ie with a charge on the porperty.
Alternative is to get a mortgage with Woolwich for 93000 which would be at a cheaper rate thne a business loan or the overdraft and not subject to regular reviews. The down side is the age is against him so the maximum term will be 7-12 years.
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