Financial Loans Your Church Should Consider This Year

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There are many reasons why a church would need a loan. Unfortunately, it’s not always easy for most people to determine the most appropriate loans for churches, as religious institutions are usually considered to be a challenging asset class by most lenders. Luckily, my research has led me to a few viable options your church can consider to secure a financial loan, so keep reading.

Lines of Credit (LOC)

In many cases, churches borrow to expand their space or finish a construction. Construction work usually requires a steady stream of working capital, and that’s why a business line of credit can come in handy. A business line of credit refers to a revolving loan that allows individuals or institutions to access a fixed amount of capital to meet short-term financial needs. With a line of credit, your church can enjoy the flexibility to either pay down the loan as needed, or advance it.

The church also gets to receive a steady supply of capital without the common limitations of term loans. It’s also easy to move cash to and fro the bank account, making it easy to make payments.

Many churches also love the fact that lines of credit are usually set with interest-only monthly payments. This means that during a construction project, for instance, your church can save on the monthly expenses with smaller chunks of payment. When the project is complete, the church can find ways of paying off the loan without worrying about the headache of early payment penalties.

Just remember that most lines of credit loans are short-term loans, and their terms rarely exceed one year. However, if the church performs as agreed, it can be allowed by the lender to renew the loan for future use. The lender may use the church’s assets to secure the loan. Some popular institutions that offer these types of church loans are online lenders.

Payday alternative loan (PAL)

Your church can also seek the payday alternative loan if it is in need of fulfilling an urgent financial obligation. PALs are usually offered by certain federal credit unions. These loans usually carry lower fees than the conventional payday loans. This is important because it helps individuals and institutions avoid a possible endless debt cycle.

Before getting this loan, your church needs to understand that the interest rate should not go beyond 28%, and that the credit unions should not ask for a hefty application fee to cover the application processing costs.

Similarly, it’s important to know that the church is limited to a loan-repayment term of between one and six months. The church should demonstrate that it meets certain financial qualifications, such as not having a bankruptcy or disclosing the purpose of the money.

Mortgage loan

A mortgage refers to the kind of loan that is secured to purchase real estate. Before you consider a mortgage loan, it’s important to learn as much as you can about mortgage terms to be on the safe side. A church and similar religious properties, such as convents, temples, mosques and religious schools are sometimes considered a specific type of real estate. Usually, specialty lenders offer mortgage loans for most types of religious properties, and the loans usually follow the conventional commercial loan terms.

If your church wants to acquire a piece of real estate, it can find a commercial mortgage broker to help it determine the right lender. When it finds a lender, the church will receive a certain amount of money for the property. The loan is secured by the property the church wishes to acquire, so the lender has to get a lien against it. You can expect the loan amount to be up to 95% of the purchase price of the church’s property.

The interest rate usually ranges from 3% to 8%. Although the mortgage has to be paid off over a certain period of time after its approval, your church can pay off the loan early along with the prepayment penalties. In case your church fails to pay off the loan on time, the lender will be free to take the property from the church.

Conclusion

Regardless of why your church requires a financial loan, there are several financial options it can consider to get the money. It can seek out a Line of Credit, a payday alternative loan (PAL) or a mortgage loan.