HEQ Revolving Credit Life Insurance
Given the increasing expense of underwriting small-to medium-sized installment loans, the use of revolving credit is a viable mechanism for lenders to quickly and profitably extend credit.
A revolving credit program is a lending vehicle that provides a solution to problems inherent with installment loan collateral and the fluctuating cycle of installment lending activity. Although there are many approaches to revolving-type credit, the following is an outline of what a typical program might look like:
- Amount of extended credit would be based on equity in the real estate, not to exceed a pre-determined percentage of the equity. Value of property could be based on the original appraisal, current S.E.V., or a current appraisal
- A second mortgage could be filed for the maximum amount of extended credit
- Credit would be accessed via a counter check, ATM card, VISA/MasterCard etc., based on the account being current, and under limit
- Interest could be a fixed rate or variable monthly, using an external index
- Eliminates multiple underwriting of different loans for the same borrower
- Eliminates repossession problems associated with installment loan-type collateral
- Reduces problems and expense of verifying insurance coverage on the collateral
*Allows lender to quickly extend large amounts of credit. Industry figures nationally indicate that approximately 50% of extended credit will be used after the first year.