Different Loan Types
There are various types of loans available in Australia. These different loan types have its own purposes, strengths and target market. Therefore, to get a loan, the borrower must select the one that would match perfectly with his objective.
Standard Variable Low Interest Loan are the type that is affected by the length of the loan period. Since loan rates change over time, the borrower may experience a lower repayment when the interest rates decline. However, when rates go higher, the borrower should expect to pay a higher amount. This is not applicable to those with a limited paying capacity.
Basic Variable Loans are almost the same with a Standard Variable Loan except that it offers a lower interest rate in exchange for features set by the lending institution. Borrowers are advised to double check the lending institution's contract before agreeing on any terms since there are other multiple variable loans available for a single company.
Fixed Rate Low Interest Loan are common among personal loans. This type has a set interest rate for a given amount of time, regardless if the market increases or decreases loan rate. This is a good loan type to consider for those who wish to borrow money and have the capacity to pay for the agreed loan period.
Mortgage Offset Loans use a personal account to adjust the borrower's interest rate. Deposit and withdrawal from the account can be done at will but it directly affects the earlier interest rate. There are various ways to pay for the mortgage but lenders suggest using a credit card and paying the monthly card bill through the mortgage account to balance the loan rate.
Introductory Loans may be offered by lending institutions to showcase a new loan type to the market. This type of loan has a lower interest rate for a fixed period of time but may increase once the lock-in period expires. Borrowers are advised to check the loan mechanics before settling for this type.
Principal and Low Interest Loan allow the borrower to pay parts of the principal and interest in a fixed amount of time to lessen the loan period at a faster rate. This is good for those who wish to pay for their loans at the quickest possible time.
Interest Only Loans does not require payments for the principle. The lending institution only requires the interest to be paid and is an excellent option for investors.
Other loan types include Revolving Line of Credit, Capped Loans and Salary Loan.
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