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Loan Information
What are the 4 main types of Loans?
To help you understand the finance industry ‘jargon’ a little better, below we have listed the four most common types of loans sought. If you have any further questions on any of the loans mentioned, or your other options, please don’t hesitate to contact one of our friendly staff members.
There are many other types of loans available, that offer a variety to suit everyone’s individual needs. To find the right loan for you, you can organise a no obligation, free consultation with our mobile brokers.
1. BASIC VARIABLE
 Basic Variable loans are just that, basic!
The rate is variable and can move up or down with the market changes.
They are designed for people who just want a low interest rate without the need for extras such as offset accounts, split facilities, redraw, salary crediting, parental leave etc.
Often these extras are available, but at a fee.
2. STANDARD VARIABLE
 Standard Variable loans offer all the features one could possibly wish for, but at a higher interest rate than Basic Variable loans.
The rate is variable and can more up or down with the market changes.
These loans are designed for higher income households where their higher disposable income can be used to enable them to pay off their home sooner. This will therefore save them more in the long run than would have been possible even at a lower interest rate.
Within this category a number of Banks offer “Professional Pack” loans which give a discounted rate (as much as 0.7%) for the life of the loan. There are qualifying conditions, that your broker can discuss with you at an obligation free appointment.
3. EQUITY / LINE OF CREDIT
 Equity loans or Line of Credit facilities are especially designed for clients with particular portfolio needs.
In the past many Institutions have placed borrowers onto this type of facility, without first understanding their clients’ true needs. Currently 30% of Solutions Finance revolves around transferring clients away from this type of facility.
10 years ago, Equity loans made up 50% of the market; however now days only 15% of loans are of this type.
During a consultation your broker will discuss the benefits and pitfalls of a Line of Credit so that you can decide if a Line of Credit suits your individual requirements.
4. FIXED RATE
 Fixed rate loans have a fixed rate of interest for an agreed term.
Once this term is over, the loan reverts to a variable rate or is again fixed for another agreed term.
Fixed rate loans are very effective to minimise potential loss in a rapidly changing rate market.
There are some disadvantages, such as limits on extra payments and the inability to offset against it; however, the benefits far outweigh the negatives in a rapidly increasing rate market. |
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