Bank keeps increasing loan rate..is this right?

thebooxttt

I borrowed 200k about 4 years ago to part fund a building purchase & convert to a Restaurant . Long story short...we drew down money, bought the property, went for planning, ran into problems, then the boom went bang & the bank pulled the remaining loan to finish the project.Things went from bad to worse & I lost my job, all savings went on trying to keep repayments on own mortgage & the said property wouldn't sell.
I'm not any good with ever changing interest rates etc. all I can see is the amount we repay each month & it seems to have gone from bad to worse & I'm wondering is this right???
We had been paying €1,200 pm capital & interest over a 20 year period. Folowing our bad patch I asked for an interest only option which was offered at €575 pm. Again things went a bit pear shaped with a failed business venture (ended up paying staff last month of wages by swiping personal CCard through business Visa machine...Note to self: NOT a good idea) so I asked bank for a loan repayment holiday, last December. The bank agreed for 5 months, which helped. After 5 months we reviewed the outstanding business loan & I felt no option but to agree their terms of 6 months interest only paying €686 pm, which is now up for review again.
Things have begun to turn around & we will be celebrating Xmas in our house this year (Thank God) but in the meantime the bank are now insisting on interest repayments of €720 pm with a review next march with the hope of making a capital & interest agreement.
My issue is how much our interest only repayments are increasing year on year plus just when things are beginning to turn around the bank are extracting more money & finally if we keep leapfrogging from review to review & interest/loan rates are adjusted upwards will we end up paying astronomical amounts in a matter of a few years?
Comfuseddotcom!
Cheers, T.

Walkingstick

thebooxttt wrote: »

I borrowed 200k about 4 years ago to part fund a building purchase & convert to a Restaurant . Long story short...we drew down money, bought the property, went for planning, ran into problems, then the boom went bang & the bank pulled the remaining loan to finish the project.Things went from bad to worse & I lost my job, all savings went on trying to keep repayments on own mortgage & the said property wouldn't sell.
I'm not any good with ever changing interest rates etc. all I can see is the amount we repay each month & it seems to have gone from bad to worse & I'm wondering is this right???
We had been paying €1,200 pm capital & interest over a 20 year period. Folowing our bad patch I asked for an interest only option which was offered at €575 pm. Again things went a bit pear shaped with a failed business venture (ended up paying staff last month of wages by swiping personal CCard through business Visa machine...Note to self: NOT a good idea) so I asked bank for a loan repayment holiday, last December. The bank agreed for 5 months, which helped. After 5 months we reviewed the outstanding business loan & I felt no option but to agree their terms of 6 months interest only paying €686 pm, which is now up for review again.
Things have begun to turn around & we will be celebrating Xmas in our house this year (Thank God) but in the meantime the bank are now insisting on interest repayments of €720 pm with a review next march with the hope of making a capital & interest agreement.
My issue is how much our interest only repayments are increasing year on year plus just when things are beginning to turn around the bank are extracting more money & finally if we keep leapfrogging from review to review & interest/loan rates are adjusted upwards will we end up paying astronomical amounts in a matter of a few years?
Comfuseddotcom!
Cheers, T.

Hi T,
First off. Well done on surviving the past year. You have obviously been through a challenging time. It is good to hear that things are begining to turn around a little. I hear on today's news that Ulster Bank have decided not to pass on the reduction in interest rates. No surprise there. Ulster Bank CEO has just been on the news on TV3 and was asked why they did not pass on the rate cut. He said that Ulster Bank are still trying to recover from the banking crisis and that they are not in a position to pass on the rate reduction. Now if you apply the same logic to your business as your bank is doing, well like UB's mortgage holders they may not like it but it is absolutely necessary for the survival of your business. So my advice would be to tell UB that they will have to accept €686 per month as they interest payment for the foreseeable. It is the best you can offer them at present. The will have many other borrowers in a much worse position than you and they are focusing on them. With this arrangement they know where they stand and can let you get on and rebuild your business.

I own and run my own business too. '09 and '10 were very tough years. This year has seen an improvement but there is little optimisim around looking into next year. I am fortunate in that over the past decade I've paid off all loans and mortages. I still have to provide for my family and that is in itself a challenge.

Anyway I admire your determination and positive approach to your business. I wish you well for 2012.

Regards
Walkingstick

thebooxttt

Cheers Walkingstick,

Good advice & words of encouragement. Maybe it's the kick in the pants I need to make a stand thus easing the pressure 'till were out of the woods a little bit more. The info on UB is VERY relevent to me... cheers, T.

Walkingstick

You are welcome T.