2.0.2 Interest on loan
Before any loan is granted, the borrower must clarify the position as to the payment of interest on the loan draw-downs during construction. The mode of payment of this interest may vary and may be payable every six months from the date of the first drawdown with a final payment in respect of the pre-delivery draw-downs on the day of delivery, this is the standard pattern for years. It is a usual tendency to allow the 'roll up' of the interest and added to the total loan outstanding when the vessel is delivered, this leads to a substantial reduction on the cash sums that the owner has to pay prior to the vessel entering service. As an alternative to the owner drawing down the favorable loan to help make his payments during construction, in some countries the yard itself arranges to borrow the equivalent funds and pay the interest thereon, in such cases the contract price is increased to take this into account.
The interest rates applied by the banks to the shipping corporation depend on the base rates of the banks. When the base rate for the bank is used the rate payable by the borrower will change as the base rate changes.
2.0.3 Amount of loan
When a bank wants to grant a loan to a shipping corporation it must find out the cost of the vessel to be acquired using the loan. This is important since the bank cannot grant a loan that will completely cover the cost of the vessel. The most common rule is that the bank loan should finance 80% of the contract price while the owner pays for the remaining 20%. The bank loan will also not be used to finance the initial stages of the contract, therefore before a loan is granted the borrower must prove to the...
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