Different Loan Types
A new home or a new loan. Which is easier to find?
Different Loan Consultant in Bentleigh
When it comes to borrowing money, there are many different types of loans available to suit different needs and circumstances. Whether you’re looking to buy a home, invest in property, or start a business, finding the right loan is crucial for your financial success. That’s where our expert consultancy services come in. Our team of experienced consultants in Bentleigh specialize in different loans and can provide tailored advice and guidance to help you find the right loan for your unique needs. We’ll work closely with you to understand your financial goals and budget, and provide expert recommendations on the best loan options to suit your needs. With our help, you can confidently navigate the complex world of loans and borrowing, and achieve your financial goals. Contact us today to learn more about our different loan consultancy services in Bentleigh.
- Variable loans : Variable loans have interest rates that can change over time based on market conditions. This means that borrowers’ monthly repayments may increase or decrease depending on the movement of interest rates. Variable loans can offer flexibility and potentially lower interest rates compared to fixed-rate loans.
- Fixed Interest rate Loan : Fixed interest rate loans have a set interest rate for the entire loan term, providing borrowers with certainty and stability in their repayments. This means that borrowers’ monthly repayments will remain the same regardless of changes in the market interest rates.
- Split rate loan : Split rate loan allow borrowers to split their loan between fixed and variable interest rates, providing the benefits of both loan types. Borrowers can choose the percentage of their loan that will have a fixed interest rate, providing certainty and stability in their repayments, while the remaining percentage will have a variable interest rate, providing flexibility and potentially lower interest rates.
- Interest only loan : Interest-only loans allow borrowers to make repayments that only cover the interest charged on the loan, without paying off the principal amount. This means that borrowers can potentially reduce their monthly repayments in the short term. However, interest-only loans can have higher interest rates than principal and interest loans, and borrowers will need to pay off the principal amount at the end of the loan term, which can result in higher repayments.
- Line of Credit Loan : A line of credit loan is a type of loan that provides borrowers with a pre-approved credit limit that they can access as needed. Borrowers can withdraw funds up to the credit limit and only pay interest on the amount they use. Line of credit loans can provide flexibility and convenience, allowing borrowers to access funds as needed without having to apply for a new loan.
- Introductory Loan : Introductory loan, also known as honeymoon loan, offer borrowers a lower interest rate for an initial period, typically the first one to three years of the loan term. After the introductory period, the interest rate will revert to the standard variable rate. Introductory loan can provide borrowers with lower repayments in the short term, allowing them to save money or pay down other debts.
- Low Documentation Loan : Low documentation loan, also known as low doc loan, are designed for self-employed borrowers or those with non-traditional incomes who may not have the documentation required for a standard loan application. Low doc loan typically require less documentation, such as tax returns or financial statements, than other loan types.
Pros
- If interest rates fall, the size of your minimum repayments will too.
- Standard variable loans generally allow you to make extra repayments. Even small extra payments can cut the length and cost of your mortgage.
- Basic variable loans often don’t come with a redraw facility, removing the temptation to spend money you’ve already paid off your loan.
Cons
- If interest rates rise, the size of your repayments will too.
- Increased loan repayments due to rate rises could impact your household budget, so make sure you take potential interest rate hikes into account when working out how much money to borrow.
- You need to be disciplined around the redraw facility on a standard variable loan. If you dip into it too often, it will take much longer and cost more to pay off your loan.
- If you have a basic variable loan, you may not be able to pay it off quicker or get access to money you have already repaid if you ever need it.
The interest rate is fixed for a certain period, usually the first one to five years of the loan. This means your regular repayments stay the same regardless of changes in interest rates. At the end of the fixed period you can decide whether to fix the rate again, at whatever rate lenders are offering, or move to a variable loan.
Pros
- Your regular repayments will vary less if interest rates increase, making it easier to budget.
- If interest rates fall, your regular repayments on the variable portion will too.
- You can generally repay the variable part of the loan quicker if you wish.
Cons
- If interest rates rise, your regular repayments on the variable portion will too.
- Your additional repayments of the fixed rate portion will be limited.
- There may be significant break costs that you must pay if you exit the fixed portion of the loan earl
Your loan amount is split, so one part is variable, and the other is fixed. You decide on the proportion of variable and fixed. You enjoy some of the flexibility of a variable loan along with some of the certainty of a fixed rate loan.
Pros
- Your regular repayments will vary less
- if interest rates increase, making it easier to budget. If interest rates fall, your regular repayments on the variable portion will too.
- You can generally repay the variable part of the loan quicker if you wish.
Cons
- If interest rates rise, your regular repayments on the variable portion will too.
- Your additional repayments of the fixed rate portion will be limited.
- There may be significant break costs that you must pay if you exit the fixed portion of the loan early.
You repay only the interest on the amount borrowed usually for the first one to five years of the loan, although some lenders offer longer terms. Because you’re not also paying off the principal, your monthly repayments are lower. At the end of the interest-only period, you begin to pay off both interest and principal. These loans are especially popular with investors who plan to pay off the principal when the property is sold. This strategy is usually reliant on the property having achieved capital growth before it is sold.
Pros
- Lower regular repayments during the interest only period.
- If it is not a fixed rate loan, there may be flexibility to pay off, and possibly redraw, the principal at your convenience during the interest-only period.
Cons
- The overall cost of the loan is likely to be significantly higher.
- At the end of the interest only period you have the same level of debt as when you started.
- If you’re not able to extend your interest-only period your repayments will increase at the end of the interest-only period.
- You could face a sudden increase in regular repayments at the end of the interest-only period.
You can pay into and withdraw from your home loan every month, so long as you keep up the regular required repayments. Many people choose to have their salary paid into their line of credit account. This type of loan is good for people who want maximum flexibility in their access to funds.
Pros
- You can use your income to help reduce interest charges and pay off your mortgage quicker.
- Provides great flexibility for you to access available funds.
- Simplifies your banking into one account
Cons
- Without proper monitoring and discipline, you won’t pay off the principal and will continue to carry or increase your level of debt.
- Line of credit loans usually carry higher interest rates than a standard variable mortgage
Originally designed for first-home buyers, but now available more widely, introductory loans offer a discounted interest rate for the first 6 to 12 months, before the rate reverts to the usual variable interest rate.
Pros
- Lower regular repayments for an initial ‘honeymoon’ period.
Cons
- Loans may have restrictions, such as no redraw facilities, for the entire length of the loan.
- When the honeymoon rate period ends a homeowner may be locked into an interest rate that is not as competitive as elsewhere.
- Some banks may charge early termination fees if you decide to switch to a new lender.
Popular with self-employed people, these loans require less documentation or proof of income than most, but often carry higher interest rates or require a larger deposit because of the perceived higher lender risk. In most cases you will be financially better off getting together full documentation for another type of loan. But if this isn’t possible, a low doc loan may be your best opportunity to borrow money.
Pros
- Lower requirement for evidence of income.
Cons
- You will probably pay higher interest than with other home loan types, or may need a larger deposit, or both.
