Proportion

• Vendor take-back loans are usually a proportion of the sale price. In most cases, the buyer is able to secure some money from a bank but not all of the purchase price. By loaning the remainder of the sale price, the seller can speed up the sale.
  
  

Value

• Vendor take-back loans are generally offered at below-market value interest rates, as they are offered as an incentive to buy. So, if a house's asking price is $120,000 and the buyer can only get approved for $100,000 in bank financing at 7 percent interest, the seller may offer a further $20,000 at 5 percent interest. It is below the bank's interest rate because the seller is trying to give the buyer a reason to borrow the extra money and close the deal.
  
  

Effects

• Vendor take-back loans let people buy property above what a bank is prepared to lend them. This means, according to Investopedia.com, that they can live in houses that they cannot afford under traditional financing methods.