This is the most common loan in Australia. As the name implies,
the interest rate may vary either up or down over the period of the loan. These
loans also tend to be the most flexible home loans with readily
available extras such as redraw, offset and the ability to
make additional repayments.
Benefits
If interest rates fall, so should your repayments.Probably
the most flexible of all home loans, allowing you to redraw
funds, make additional repayments and offset creditbalances
against your loan balance. These extras can reduce the amount
of interest you have to pay, meaning you might be able to
repay your loan faster.
Considerations
If interest rates rise, so will your loan repayments. Make
sure you can actually use the added benefits because, if you
can’t, lower interest rates might be a better option.
Try our Calculator to see what difference it might make to
you.
This is a no frills version of the Standard Variable Rate
Loan. Basically, the extras
offered under the Standard Variable Rate Loan are removed,
allowing the lender to
reduce the interest rate charged. The fewer the features,
the cheaper the rate! This
loan is ideally suited to customers who do not have any surplus
cash flow.
Benefits
If you are not going to use the features of the Standard
Variable, why pay
for them?
Considerations
If interest rates rise, so will your loan repayments.
These loans are commonly promoted by lenders to attract customers
who are interest rate sensitive. They generally offer a guaranteed
low interest rate for a set period of time, after which the
interest rate will revert to the Standard Variable Rate.
Benefits
The interest rate is lower for the introductory period, so
your initial repayments are lower too.
Considerations
Your repayments will most likely increase once the introductory
period is over. You need to assess your overall position because
introductory loans can often end up more expensive than other
products in the long run.
As the name implies, you fix a rate on your loan which cannot
change for the agreed term, usually 1 to 10 years. These loans
are ideal for customers who want the security of knowing that
their loan repayments will not increase during the agreed
term. They are especially popular with investors seeking to
fix the cost of their investment. Fixed rate loan repayments
can either be Principal and Interest or Interest Only. Interest
Only loans tend to be used by investors where having the ability
to calculate future interest can assist with taxation management.
Benefits
Allows you to fix the cost of maintaining your loan. In other
words, you know the cost of your repayments for the life of
the loan. If the variable interest rate increases, you can
smile because yours won’t!
Considerations
Fixed loans tend not to be as flexible as variable rate loans.
For instance, you might
not be able to make additional payments, redraw or offset
credit balances. If the
variable interest rate falls, yours won’t. You might
be up for early repayment penalties if you wish to repay,
refinance or switch to a variable rate before the
loan matures.
Idea
If you are concerned about this, why not consider a split
loan facility where you
maintain a portion on variable interest and fix the rest?
Traditionally taken out at the end of the financial year,
these are fixed rate loans that allow the customer to pay
in advance all their interest for the next financial year.
This means they can claim any available tax deduction in the
current financial year. Because the tax deduction is the only
reason for paying interest in advance, this is only available
for investment loans.
Benefits
Tax effective. Discount provided on interest rate because
of pre-payment.
Considerations
Talk to your financial planner to see if this is an effective
strategy for you.
These loans are predominantly for the self-employed who are
unable to substantiate their income to qualify for traditional
loan products. They are called ‘low docs’ because
the applicant is only required to supply the lender with a
declaration (which come in forms) that they can afford the
repayments. These loans are often restricted by LVR (Loan
to Value Ratio) and the maximum loan amount. They are usually
slightly more expensive than traditional loans due to the
higher risk profile.
A Line of Credit is an ongoing source of low cost finance
that is secured against the equity that you have in your home.
It is similar to an overdraft facility in that funds can be
withdrawn up to a certain limit with no principal repayment
deadlines.
Lines of credit are generally used for investment purposes,
for example, as equity for an additional property investment
or for investment in shares or managed funds.
Benefits
You can use the funds as they are required, and only pay
interest on the outstanding balance.
Considerations
You need to be budget conscious to operate this type of loan.
If you are unable to budget or have a tendency to spend any
money available, then this might not be the loan for you.
If you have enough equity in your current home, a Bridging
Loan can be arranged. These loans enable you to buy your new
home now and sell your current home later. The good news is
these loans can be arranged at Standard Variable rates.
These loans work by enabling you to split the loan two ways:
a portion is locked into a fixed rate for a fixed term, and
the balance is charged at the variable rate. It is an excellent
way of reducing the effects of interest rate movements. If
the variable rate falls, you benefit from the fall on your
variable rate portion. If they increase, you benefit from
your Fixed Rate portion which will not increase.
Benefits
Creates a sense of interest rate stability. The variable
portion can give you the flexibility to redraw, offset and
to make extra repayments.
Considerations
If interest rates rise your variable rate and therefore
your payments will still increase. If interest rates fall
you will still be paying interest on your fixed rate loan
at he original rate.
An All-in-One Loan allows you to repay extra amounts off
your loan and ‘redraw’ them when you really need
them. The benefit is that if you make additional repayments
above the minimum required, your loan balance will fall and
so will your interest payments. The loan operates like a normal
cheque account with salaries or other monies being credited
to the account, and funds withdrawn in the usual ways, via
cheque book, ATM or EFTPOS.
Some lenders do not have All-in-One accounts but operate
Offset accounts instead. An Offset account is a stand-alone
credit account that acts as your day-to-day transaction account.
The outstanding balance on the account is ‘offset’
against your mortgage and you only pay interest on the net
amount. Most Offset accounts provide a 100% offset but you
should confirm this before entering into any deal.
Benefits
This is the best value for money because credit balances
(or deposits) will reduce the balance on which you pay interest.
While repayments won’t decrease, you will be paying
off your loan faster. Operates like a normal bank transaction
account.
Considerations
Interest rates may be slightly higher due to the offset
feature. Make sure that the offset facility will be of greater
benefit to you than the higher interest cost. Check the terms
under which the Offset works – for example, check whether
you have to keep a minimum balance in the account.
Many lenders provide interest rates and /or fee discounts
for customers they describe as ‘professional’.
Some lenders use income as the determinant while others use
the amount the client is borrowing. Whatever the case, these
products can provide customers with up to 0.7% off the standard
rates, as well as providing other benefits to do with credit
cards or insurance, for example.
There are a number of lenders who specialise in providing
loans to individuals who have a history of defaults or judgements.
They are sometimes called lenders of ‘last resort’.
They are also called ‘drycleaners’, as their intention
is to provide credit to individuals who would otherwise not
be able to borrow, and to get them back on track so they are
able to re-enter the mainstream mortgage market in a couple
of years. The interest rates charged are significantly higher,
due to the increased risk, with the actual rate being dependent
on the applicant’s credit rating.
A Personal Loan is a loan secured by a chattel mortgage over
the motor vehicle. It is a sensible approach for any individual
who needs to acquire a motor vehicle, because a Loan allows
you to utilise your capital for other purposes.
Consider these advantages:
- Fixed payments make budgeting easier and provide a hedge
against inflation.
- You can elect to have final instalment or balloon on
our contract, or no balloon
and enjoy full ownership if the vehicle is at the end of
the contract.
- Flexible terms from 4 months to 60 months enables you
to tailor the monthly
- repayment to meet your individual requirements.
- Motor vehicle is the only security. In some circumstances,
however, a guarantee may also be required.
- Available from approved dealers for your convenience.
- An alternative line of funds from existing sources, such
as banks and building societies, providing greater flexibility.
- Computer direct debiting of your monthly payment can
also be arranged, which is convenient and saves time.
Prestige Purchase/Chattel Mortgage is a sensible approach
for any business that needs to either upgrade or acquire a
new or used motor vehicle. Funding your vehicle by way of
Prestige Purchase/Chattel Mortgage allows you to utilise your
capital for other purposes.
Consider these advantages:
- Interest payments made on motor vehicles used solely
for income-producing purposes are made from pre-tax income
and not after-tax profits.
- Where the vehicle is used for income-producing purposes,
interest charges and
- depreciation in the vehicle might be tax deductible.
- You can elect to place a deposit in the contract, and
choose the
amount of deposit
- you wish to make, either as cash or equity from your trade-in,
enabling
you to tailor
- the monthly payment to suit your budget.
- Monthly payments are based on the original cost of the
vehicle, less the final
- payment at the end of the hiring period.
- Fixed payments make budgeting easier and provide a hedge
against inflation.
- Direct debiting of your monthly payment can also be arranged,
which is convenient and saves time.
- Flexible terms from 4 months to 60 months, to match your
individual
requirements and lifestyle.
A Personal Lease is a sensible approach for any individual
who needs to finance a motor vehicle. With a Personal Lease,
the monthly repayments are fixed and are based on the original
amount financed, less the residual value of the vehicle at
the end of the lease term. Acquiring your vehicle by way of
a Personal Lease allows you to utilise your capital for other
purposes.
Consider these advantages:
- Fixed payments make budgeting easier and provide a hedge
against inflation.
- Flexible terms from 4 months to 60 months to meet your
individual requirements.
- Flexible residual values enable you to tailor repayments
to suit your budget.
- Motor vehicle is the only security. In some circumstances,
however, a guarantee may also be required.
- Available from approved dealers for your convenience.
- An alternative line of funds from existing sources, such
as banks and building societies, providing greater flexibility.
- Direct debiting of your monthly payment can also be arranged,
which is convenient and saves time.
Prestige Lease
Leasing is a sensible approach for any business that needs
to either upgrade or to acquire additional new or used motor
vehicles. Prestige Lease allows you to acquire whatever vehicle
you need, without tying up valuable capital.
Consider these advantages:
- Where the motor vehicle is used for income-producing
purposes, tax deduction
- may be claimed by the lessee.
- Lease payment are made from pre-tax income, not after-tax
profits.
- Fixed lease payments make budgeting easier. The amount
of the monthly lease
- payment can also be tailored to suit you.
- Monthly payments are based on the original cost of the
car, less the residual value of the car at the end of the
lease term.
- Flexible terms from 4 months to 60 months to meet your
individual requirements.
- Direct debiting of your monthly payment can also be arranged,
which is convenient and saves time.
- An alternative line of funds from existing sources, such
as banks and building societies,
- providing greater flexibility.
- Prestige lease can be used inconjunction with ‘Deed
of Novation’ to aid salary
- packaging.
