Re: 0% interest and Substitution of Collateral? - Posted by Brent_IL
Posted by Brent_IL on January 29, 2002 at 23:48:53:
Getting terms is my thing.
Once I dispose of the all-cash request, I start at 0% and work up. It doesn’t happen by plugging in a zero interest rate. It’s a combination of terms and concessions which results in an effective rate lower than the nominal interest charge. I get 0% sometimes, but it is usually a springboard for negotiation. If I agree to make a down payment, my interest cost is usually between 2 and 3.5%. If the seller is making his own down payment, my effective rate hovers around 7%.
I won’t sign a deal without substitution of collateral because I need flexibility to finance or re-sell. The contract has at least three variations of clauses that accomplish the same thing so if one or two get kicked, the third slides through.
To a terms person, substitution of collateral, and to a lesser extent, subordination, is one of the essential points of the deal.
This is also discussed in the archives.