Southern Cross Partners sets the rate of interest that will apply to each loan at the time that the loan advance is first made.
When the investment is made available to you, it is offered at this interest rate (the loan rate) p.a., less a small margin that is retained by us. Both interest rates are disclosed to you. The interest rate that is offered with each investment, is all yours. There are no deductions from this, except tax (see below).
There are various loan interest payment options available to our borrowers (depending on their situations), and these are also mirrored on the investment offerings. These are:
Interest Only Payments (these are the most common)
Borrowers pay their loan interest on a regular basis (weekly / fortnightly / monthly).
We will pay this interest to you monthly, to the extent received, on the monthly anniversary date of the loan advance. For example if the loan was provided to the borrower on the 8th of the month, their payment is due the 8th of the following month and each month after that. Their payment is processed and into the investors bank account the next business day.
Borrowers do not make any interest payments during the term of the loan. All interest is collected when the loan is repaid. In the interim, interest capitalises (adds) to the loan each month.
(Note that the Total Loan Amount and the Loan to Value Ratio is disclosed and calculated based on the end value of the loan, ie with all interest added to it)
In this situation, we will do the same with your investment, so your interest will capitalise to your investment each month, and will be paid when the loan repays at the end. This does provide a higher return to you, as you receive interest on your interest, but it is not paid until the end.
Interest payments can be either be:
- Paid by Direct Credit to your Bank Account
- Retained in the Loan Investment Trustees Limited Trust account pending your instructions
All income in New Zealand is subject to tax, with the rate of this tax determined by each individuals specific circumstances. We will act on your instructions (in respect to the rate of tax), to the extent that the law allows, and we will deduct withholding tax from your interest payments, and pay this tax to the Inland Revenue each month.
You will then be provided with a Tax Certificate each year (as at 31st March), which will summarise the total interest that you have been paid, and the tax deducted.
In some circumstances, you are able to obtain an Exemption Certificate from the Inland Revenue, and if this is the case and you do provide us with a copy, we will not deduct any tax.
All borrowers have a certain level of default interest that applies if they do not meet their payment obligations. This does not automatically pass to you and is only triggered if your investment is in default.
It may be that Southern Cross Partners elects to meet your monthly interest payments if the borrower does not pay. In this instance your investment is not in default, so no default interest payments will be made to you.
However, if the borrower does not pay and Southern Cross Partners elects to not meet your monthly interest payments, your investment is then in default and you will be entitled to some default interest payments.
Default interest rules differ between Regulated Term Loan and Non Regulated Term Loan. To fully understand these, please refer to the sample loan agreements, which are available by selecting the links in this paragraph.
Where you are entitled to default interest, it will be at the rate of 50% of the actual default interest that we collect, for the period that your investment is in default, and will be paid to you once it has been collected by us.
Please note that in some circumstances, we are obliged to ‘negotiate’ default charges in order to reach a compromise solution. Any discounting of default by Southern Cross Partners will be done at our sole discretion and may result in you receiving a lesser amount.