Types of Loans Fixed Loan

Everyone likes to select the type of loan that will save them the most money!

However, it can be difficult to get the timing precisely right with a fixed rate loan.

Even the experts get it wrong from time to time, so it’s very important to make your decision based on the overall features of the loan. With a fixed rate loan, you’ll be able to accurately plan your loan repayments as they will be the same each month. If you’re not currently in a position to make additional repayments to your loan, ‘additional repayment’ penalties that may apply will not be relevant either.

Variable Loan

With variable rate loans, repayments rise and fall with interest rates. If you have the capacity to cover any increases in your monthly repayments, variable home loans can provide lots of useful features.

These include:

– The ability to make additional repayments at no cost

– Use of a redraw facility

– Use of an offset account

– Flexibility to refinance or sell your property without incurring ‘break fees’

Split Rate

In a split rate loan part of the loan is fixed, and the other part is variable. This lets you enjoy the benefits of an interest rate drop, but also protects you from being fully affected if they rise. Plus it allows for a relative degree of certainty with your loan repayments whilst enjoying the additional flexible features of a variable home loan. SIMPLY INTELLIGENT FINANCE

Interest Only

You only pay the interest on your loan but do not repay the principal loan amount. Your repayments are less but you still have the same level of debt at the end of the interest only period.

Line of Credit

You can pay into and withdraw from this account as long as you keep up with the required repayments. You can have your income paid into this account to help pay off the mortgage sooner, however interest rates are usually higher.

Low Documentation

These are popular with self-employed people because they need less documentation or proof of income. However, they usually have a higher rate of interest or need a larger deposit, or both.