What different types of loans are there?

Finding the right type of loan for you is not that difficult, with many different options depending on your circumstances and needs. If you are purchasing a home, for example, you can get good benefits going with a loan with an introductory fixed rate. There are also times when you will need to keep the rate open if you suspect the interest rates are going lower in the foreseeable future.

At this moment, Australian lending companies are aggressively trying to win over your business. This is due to a decline in interest rates, meaning lenders have actually been more competitive in your favour by offering the best rates and pricings to the market. Here are different types of loans you can get to help you make your decision:

Standard Variable Loan

The most popular choice of home loans in Australia, which allows the rates to fluctuate according to the market. This is quite beneficial if you want to take advantage of the descending trend of the current interest rate. Each of your repayment will go toward the interest and also principle amount. The important thing to consider is your variable rate can potentially rise to a point where it impacts your repayment budget, so make sure that you are aware of the current market trend to anticipate any hikes in interest rate.

Basic Variable Loan

Also known as ‘no frills’ loan, a basic variable loan generally offers lower rates than standard variable loan, but without features such as offset account, redraw, extra repayments and the ability to split the loan. However, if you are not inclined to use any of the above features from the bank, you can enjoy this credit product at a lower rate which resulting in lower repayment amount in comparison.

Fixed Interest Rate

Your loan interest rate is locked for a certain period of time, which is usually for the first few years of the term period. This is useful when you don’t want to worry about changes of rates happening in the market, and it is easier to plan financially as your repayment would not be affected of the interest rate fluctuation. At the end of the fixed loan period you would be able to choose to stay with the fixed loan or change to variable as you see fit. Aside from the benefits, this type of loan won’t allow you to pay off early before the fixed loan period ends without imposing an early exit fee.

Split Interest Rate

As the name suggested, this type of loan allows you to split your loan into two types of loans: fixed and variable. You can enjoy the benefits of both options if you can plan it carefully, which is the flexibility of the variable loan and also the certainty of the fixed loan.

Low Doc and No Doc Loan

Popular among borrowers who are self employed or small business owners, who are unable to provide proof of their salary due to their nature of work. Lenders will require less documentation for this type of loan, whether on fixed or variable rate, in return they would offer loans at a higher rate than usual because of the risk they are taking in approving the loan. Part of their assurance is a declaration that the borrowers would be able to fulfill their repayment on a timely manner. If possible, we strongly recommend that you are better off choosing another type of loan which require your full documentation to get a lower rate.

For more information on the types of loan products and how they suit your personal loan needs, the team at SpotMeNow Australia can help. Easy and fast online application process, amount ranging from $1,000 – $5,000 cash in the same day. Get your loan approved today!

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