Do you know the difference between serviced monthly, rolled up, and retained interest?

Interest rates are the main cost of borrowing money. When you borrow money from a lender you are expected to pay back the amount that you borrowed, plus the interest on the amount borrowed. The number of different interest rates available when borrowing can be confusing, and varied.

The types of interest rates on commercial finance are:

1. ‘Serviced monthly interest’ is the common monthly interest payment, and payments are made each month by the borrower to the lender.
2. ‘Rolled up interest’ means there will be no monthly interest payments required in your loan, and interest is ‘rolled up’ and paid as a lump sum when the loan term ends. In other words, the interest is paid at the end of the loan terms, and not spread out across the term of the loan.
3. ‘Retained interest’ is when a loan does not require borrower to make any monthly interest payments and the interest is added to the total loan amount, and is paid to investors at the interest due date.

Is it worth taking a loan to grow your business? In general terms and if your business is viable, funds to help you grow can mean more customers, more employees and be an overall positive step. Business loan interest rates can vary significantly depending on your credit history, length of time trading and business financials. The most attractive business rates will be offered to businesses or individuals which are established, have a healthy bank balance, and a good history repaying previous loans or credits.

Get in touch with your local ASC office to find out more details about loans and how to secure finance for your business with sensible interest rates.