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Wealth managers adding the bank of Mum and Dad to their portfolios

Wealth managers adding the bank of Mum and Dad to their portfolios

We’ve been spruiking the virtues of the bank of Mum and Dad (BOMAD) here at Credi for some time now – we even know of a great website. Economic circumstances across the country and around the world are showing that it’s getting increasingly tougher for would-be homeowners and SMEs alike to find a source of much needed finance that won’t either tie them down with arduous terms and conditions, or strangle them with fees and punishing interest rates – and/or penalties for late payments. 

Everyone, or close to everyone seems to be tightening their belts, but at the same time, the bank of Mum and Dad is something of a mainstay.

So, you’re a wealth manager or financial advisor. You have several tricks up your sleeve, as it were and a cache of advice to give your client base. But have you considered encouraging your clients to either lend as, or borrow from the bank of Mum and Dad? It’s a perennial option that’s been getting some significant media attention of late.

Take this recent article from the Australian Financial Review, as an example. In it, we’re shown how the bank of Mum and Dad is “making a comeback” amid there being record-low lending rates, on top of generous government incentives for first-time buyers and a reduction in competition from investors. This, in turn, has raised the pressure on parents to help their family members onto the property ladder.
“BOMAD, an epithet used to describe parental funding of home loans boomed when the nation’s residential property markets hit recent highs, squeezing out many younger buyers,” the article says. “Cashed-up parents, or those with plenty of equity in their own homes, provided funds for deposits, or guaranteed loans, to help their children onto the property ladder.”

The goes on to say that at its peak, BOMAD was the nation’s fifth-largest residential lender, with ‘branches’ lending their children an average of more than $73,000.
We’ve seen a significant boom in interest from potential and existing BOMAD ‘branches’ in recent times. The volume of transactions via Credi.com’s online portal has shot up between 400-500% since April.
In ONE DAY we oversaw $2.9 million in loan transactions take place, in loans for diverse interests as business finance; a single transaction for $1.4 million for a property loan within a family for a loan to be repaid over 30 years … it’s been a busy time and we’re seeing a huge upkick in interest.
This is obviously great news for us as a business, but it also signifies a growing understanding of the value of family loans that cover not only personal property investments, but small businesses as well. More and more people are using their own money to invest in people and businesses with whom they have standing relationships. More and more people are putting their own money into their businesses to kickstart the sales process.
There’s never been a better time to get on board. Prospective lenders and borrowers among your client base are going to want to know the benefits of transactions through a BOMAD branch, and to be sure there are several. Firstly, there’s the allure of flexible options: a BOMAD lender will be able to set up a grace period to help them get off the ground or suspending repayments if there’s a rough patch making money tight. 

Lenders and borrowers have the option of establishing the loan with low-to-no interest rates, and a repayment schedule that suits everyone’s needs. And there’s also the potential end benefit for the lender: if the loan is for the borrower’s business, the lender can become an investor in the business through the loan and reap the benefits of that business becoming successful.

Either would-be homeowners or would-be entrepreneurs may find it tough to secure a loan through more ‘traditional’ avenues. But when you borrow from loved ones, you don’t need to go through the same obstacle course to get approval. Friends and family are going to be eager to help achieve either business or how ownership goals and are more likely to lend where the banks may not… and with more agreeable terms. With well documented loan agreements, interest rates and payment plans, it can be done with minimal fuss.

Credi operates to serve this very purpose and we’re the one-stop shop for this exact thing. We’ve seen a steady stream of wealth managers having embraced the idea of BOMAD loans; if you’re a wealth manager and you’d like to bolster your portfolio with them, contact us and we’ll make it happen.

Tim K. Dean, Credi Founder | Commentator & Expert on Family Lending, Bank of Mum & Dad and Neo-Credit Scores is available for media interviews and appearances. More…

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Credi the #1 lending management platform for friends family & their business

Formalise and manage your loan agreements online with Credi. Trusted by over 7,000 people worldwide. Takes minutes to set up

Use Credi for FREE – for all loans up to  A$5000, $5000 / €5000,  £5000 . Loans over cost A$20, $20, €20,  £20  or other other local currency amounts (sales tax may apply).

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