Welcome to Cash Commons!

Question

2

Should I be afraid that moving my personal bank accounts away from Wells Fargo (to a credit union) will adversely affect the terms of an SBA loan once it matures?

I have an SBA loan with 29K used (out of a 30K limit) at 5% interest rate. In December they mailed me a letter stating that due to being such a good customer, they are going to switch it to a business line of credit with the same terms (30K limit, 5%) when it matures later this summer. This is almost my last debt, and at the lowest terms, which is why it is so maxed out. I expect I'll be paying it down by $8K this year, and $10K each additional year, 'til it's paid off.

Should I be concerned that by moving my personal accounts away from them, that they may reneg on their listed terms, change them, or raise my rates? I don't know if I should keep my WF checking/savings open or if I should close them. I am planning on depositing my next paycheck in my new credit union checking account and to begin paying their loan payments with that account.

I just wonder how the big banks work!

edited Jan 19 at 5:50

mbhunter♦♦
2,594●1●2●11

asked Jan 19 at 5:02

debtmaven
88●5

Yay! Hi Debtmaven! – Frugallawyer Jan 19 at 5:52

mbhunter · Answer 1 · 2010-01-19 05:50:10Z UTC

(Welcome to Cash Commons debtmaven!)

Banks and credit unions make their money off of borrowers, not depositors. The deposits are a necessary part of being able to loan money in the US (reserve requirement) but otherwise depositors cost money. So my gut reaction would be that they wouldn't get all bent out of shape about it.

However, what's changing about your loan's terms? If the bank is offering to switch you from an SBA loan to a business line of credit, I'd wonder what they're up to, honestly. What's the catch? Do they have greater leeway in the rates they can charge with the business line than with the SBA loan? Can they charge higher fees?

New legislation through the CARD Act goes into effect in about a month. They have to disclose a lot more after that happens. Are they trying to make the switch before all of these new regulations kick in?

I don't know any of the specifics of your loan's terms, but you can always ask the credit union you're going to about what deals they can offer you. They'll be happy to get your loan business if it's a type of loan they service, so who known what they'll offer. Or at least they can tell you why they won't.

Dr Dean · Answer 2 · 2010-01-20 15:40:27Z UTC

I think risk mitigation is the important factor here. I don't use Well's Fargo, but they have a pretty good reputation re customer service.

If it would be a disaster to your company to have the loan called, why rock the boat. Get the loan payed down to a reasonable level, that wouldn't kill you if the loan was called, before closing the account.

You can always split your paycheck into both accounts, until that time. In the big scheme of things, waiting a year or so to move isn't a big deal.

If you did find a "back-stop" ie, the credit union would open you up a line of credit as MBH suggested, then go for it-you have then eliminated the risk.

Reprisals from switching banks?

2 Answers