With Interest Rates On The Rise Now Is The Time to Refinance Your Financial Advisor Loan
There are many reasons to refinance an existing loan. Chief among them is the need to secure a lower interest rate. Lower interest rates often mean lower payments, which can positively impact cash flow. This is especially true when inflation and other market factors are expected to make the costs of labor, materials, and other business expenses continue to rise.
The pandemic and the uncertainty it generated made a significant impact on the economy. To combat the impact of the pandemic and lockdowns on the economy, the Federal Reserve lowered interest rates to historic levels to encourage borrowing and spending. As continued economic pressure and supply chain woes have persisted, inflation has also risen to historic levels. Now policy makers are pushing for higher interest rates to counteract inflation, and to help stave off a possible recession.
Some advisors have hesitated to refinance with rates at all-time lows. Some may even have realized a decline on their variable rate debt if it was taken onpre-pandemic. Advisors who have delayed refinancing an existing variable rate loan during this time will want to consider that optionnow so they can lock in a lower interest rate. Interest rates have already started to rise and are expected to reach pre-pandemic levels and maybe even higher by 2023.
Additionally, refinancing could be considered a way to access low-cost capital to reinvest into the business. Refinancing to a new 10-year term with a lower payment will improve cash-flows and free-up funds for marketing, new hires, or any other needs that could contribute to the future growth of the firm. In turn, the increased value realized is likely to greatly offset the cost of capital.
Refinancing can also eliminate any restrictive covenants, especially if the debt was obtained through an advisor’s broker-dealer. The loan will likely include some stipulations that may not provide flexibility on your repayment options or may handcuff you to that BD for an extended period of time. Advisors with broker dealer loans can eliminate payment plans tied to growth and pocket that additional profit or put it toward other growth initiatives.
No matter your reasons for considering refinancing an advisor loan, it’s always best to speak to a lender and see what your options are before making a decision. PPC LOAN offers free, no-obligation consultations and can help you look at the pros and cons of refinancing. Schedule your free consultation today.