6 caveat loan exit strategies
Caveat loans have become an increasingly popular option for many Australian borrowers who need quick access to funds. Whether it’s bridging cash flow, funding a business opportunity, or covering urgent expenses, these loans are secured against property and can be arranged quickly - without the red tape of traditional bank loans.
However, while caveat loans provide speed and flexibility, they are short-term facilities - which means having a clear exit strategy in place is absolutely essential.
In this guide, we’ll explore the most common caveat loan exit strategies and highlight how a broker can help you navigate each step with confidence.
What is a caveat loan?
A caveat loan is a form of short-term finance secured against a borrower’s property, designed to provide rapid access to capital. Unlike traditional finance, approval isn’t based heavily on income, credit history, or business performance — making it a common tool for business owners who need liquidity fast and have sufficient equity in residential or commercial property.
What is an exit strategy?
An exit strategy is a plan to repay the loan within the agreed term — usually 6 to 12 months. This might involve refinancing into a longer-term facility, selling an asset, or using funds from another source to discharge the debt.
Without a plan, borrowers risk:
Excessive costs from penalty interest rates and legal fees.
Forced property sale if the lender recovers funds through repossession
Long-term credit damage reducing future borrowing options
Cash flow strain if repayments clash with business cycles
A well-structured exit strategy reassures lenders, increases the chance of approval, and protects your financial reputation. This is where a broker’s guidance becomes invaluable.
What are some common exit strategies for caveat loans?
1. REFINANCE WITH A TRADITIONAL LOAN
Refinancing is one of the most-used methods to exit a caveat loan—especially if your financial position has improved or you now meet the criteria for standard lending. This could involve transitioning to a mortgage, business loan, or a longer-term private facility with lower interest rates and more manageable repayments.
How a broker helps: Refinancing is typically only available through specialist or non-bank lenders. A broker knows which lenders are open to these deals, helps prepare a strong application, compares offers, and negotiates competitive terms to secure a sustainable solution.
2. SELL THE SECURED PROPERTY
If you’re unable to refinance or are struggling with repayment terms, selling the property tied to the loan may be the most practical solution. Proceeds from the sale can clear the caveat loan, reduce other debts, and help you avoid the risk of default.
How a broker helps: A broker can coordinate settlement timing, ensure the caveat is lifted smoothly, and work with your solicitor and lender to minimise delays or costs.
3. LEVERAGE ANOTHER PROPERTY
If you own multiple properties, you may be able to repay your caveat loan by unlocking equity elsewhere. There are two main approaches:
Borrow against another property: Take out a second mortgage or equity release on an unencumbered property to discharge the caveat loan quickly.
Sell another property: Use sale proceeds to discharge the caveat loan in full.
How a broker helps: Brokers assess whether borrowing or selling is the more effective option for your circumstances. They’ll crunch the numbers, identify suitable lenders, and align settlement dates so you avoid penalty fees or funding gaps.
4. NEGOTIATE WITH YOUR LENDER
Unexpected challenges — project delays, market changes, or cash flow disruptions — can impact repayment timelines. In some cases, you may be able to negotiate:
An extension of the loan term (usually with added fees)
Reduced interest or fees, if experiencing genuine hardship
Restructured debt, such as converting into another facility with new terms
How a broker helps: Brokers know how to present your situation strategically and negotiate terms you’re unlikely to secure on your own. They act as your advocate, protecting your position while maintaining lender confidence.
5. ARRANGE A SHORT SALE
A short sale occurs when the secured property is sold for less than the loan balance, with the lender agreeing to accept the proceeds as full settlement. While a short sale can help you avoid foreclosure or repossession of the property, it can also have a negative impact on your credit file.
How a broker helps: A broker helps structure the short sale proposal and manages communication with the lender, ensuring the agreement is fair and final. Their involvement reduces the risk of last-minute complications or the lender rejecting your offer.
6. SEEK DEBT SETTLEMENT
While not an ideal outcome, if repayment is no longer feasible or you are facing repossession of the property, debt settlement may be the last resort. Here, the lender agrees to accept a reduced payment instead of pursuing the full balance. Similar to a short sale, a debt settlement may negatively affect your credit score as well as your overall financial situation.
How a broker helps: Brokers understand lender risk appetites and can help structure a settlement proposal that has the best chance of being accepted. They’ll aim to reduce the amount you owe, while also negotiating fairer repayment terms so you can regain financial stability sooner.
“Caveat loans can be a useful tool for those who need quick access to finance, but borrowers should be aware of the potential risks and have a solid plan for repayment before taking out a caveat loan,” says Brandon Hamilton, Managing Director at Hamilton Finance. “If you are considering a caveat loan, it’s important to speak to an expert who can help you understand your obligations and chart the best course of action for your unique financial situation.”
Does a caveat loan sound like the ideal solution for your specific needs? Our team of expert brokers can help you find a solution that works for you. Contact Hamilton Finance online or call 1300 023 173 to get started.
