reverse loan

[christinemar]

can anybody out there please explain what a reverese loan is. Mnay thans in advance ChrisMar

[CheekyChops]

It's a sarcastic answer!

For example if you were going to get a loan of �200pm, don't get the loan, save the �200 per month until you have enough to buy he thing you were going to get the loan for in the first place.

[CheekyChops]

That should read 'a loan that would cost you �200 per month...'

[MustafaTickl]

A reverse loan is more often called a reverse mortgage. It is a loan secured against the equity left in the value of a property after any existing mortgages or loans secured on the property have been deducted. There are no monthly repayments to be made, the property must be sold at the death of the owner or co-owner and the reverse loan plus interest and costs repaid then. It is available only to older people. It is called a reverse mortgage because your equity in your property decreases or vanishes altogether, whereas with the ordinary "advance" mortgage you make monthly payments and your equity increases.

[Loosehead]

Yes it is a sarcastic answer and I am one of the culprits, but it does have a serious message. Often people with poor credit ratings ask where they can get a loan, they cannot generally get one from mainstream sources and are usually so desparate they'll pay arrangement fees and huge interest for years just so they can have a small amount now. For example Mr X wants �500, and he claims he can afford �50 per month so if he just save �50 per month at say 4% he would have enough in 10 months (ignoring savings interest for the moment) now if he borrow said amount off Provident he'll be paying �50 month for 2 years! So the "reverse loan is just really saying: Save up because no one with any sense is going to lend you money! The overall message is if you can afford to save �n per month/week now then do it anyway and then you won't have to borrow but of course they can't afford it they just think they can because they need the money now!

[MustafaTickl]

A reverse loan is a recognised industry wide term to portray an arrangement of the sort that I have indicated above. It also explains loans known as Equity Release, Home Reversion Plan, Lifetime Mortgage, etc. I have been speaking English for many tens of years all over the UK and in many overseas English speaking countries but have never before heard anyone try to use the term reverse loan to describe saving up.

[Loosehead]

No one is denyiing your answer Mustafa but I think the questioner was referring to the term as used sometimes in AB. here for example:
http://www.theanswerbank.co.uk/Business-and-Fi nance/Question346003.html