Know what to disclose when applying for a bond. It is absolutely necessary to be completely open and transparent with the banks when applying for one.
What to disclose when applying for a bond: additional deals
This is especially the case when the applicant has failed to get the full bond amount for which he has applied and makes a separate deal with the seller to cover the outstanding amount. This is a perfectly legitimate procedure, but the second deal might easily lead to the bank cancelling the bond because they now see the applicant as over-extending his debt and exceeding his affordability limits. If the bond applicant concludes such a deal with the seller without informing the bank, he could be in serious trouble when they learn of it, but the plain truth is that many buyers are not aware of this.
This sort of situation occurs especially frequently at the lower end of the market where the buyer is looking for a 100% bond but does not get it. All sorts of special deals are done in these circumstances and often the bank is not told of them. Even when such second deals are condoned by the bank they can cause inconvenient delays while the bank reconsiders the client’s financial position. In some cases, this can lead to the buyer losing the sale.
What to disclose when applying for a bond: changes in financial situation
What is more, although the stipulations of the National Credit Act are now quite widely understood, many bond applicants do not realise that they are by law obliged to report to the bank any major changes in their financial situation, e.g. the loss of employment, the failure to collect an anticipated payment or the incurring of a big unforeseen expense.
Failure to be completely open and transparent with the bank on these points may result in an unsuccessful application for a bond. With this in mind, if you need any advice concerning bonds and what should be disclosed to banks, please do not hesitate to contact us at [email protected].
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