The Best Loan For You

Wednesday, February 8th, 2017

For shorter term finance you may look at personal loans, car loans and credit cards whilst for the longer term you could look at a home loan or investment loan. When you need money and there are so many loan options on offer, how do you choose the one that suits your needs? Let’s focus on home loans for a moment.

 

Choosing the right home loan

Home loans are as individual as you are and before you lock in to your ideal mortgage, it’s important that you talk to an experienced mortgage broker or home loan specialist to discuss the features you are looking for in a home loan – as well as how much it will cost you in ongoing fees, rates and charges.

 

Comparing Home Loans

Before choosing your perfect loan? Compare!

Get your hands on a facts sheet of key information from different lenders to enable you to make a direct comparison of different features and fees.

Choosing the right loan is about getting accurate information about the total amount you’ll need to pay back to your lender, including all repayment fees and charges.

By examining the personalised comparison rate, you can check the total cost of each loan against other loans on the market. Compare apples with apples!

Remember – All credit providers must provide you with you a key facts sheet for any home loan, if you ask.

 

Warning

Take a closer look at any companies that spruik loans that claim to help you pay your mortgage off faster.

The only genuine ways to do this are to increase your repayments, or find a loan with lower fees and a low interest rate.

It’s important to note that, typically, the more flexible features a loan has to offer, the higher the cost will usually be.

 

What is an interest-only loan?

Just as the name indicates, the repayments on this loan only cover the loan’s interest.

The actual principal amount that you borrowed won’t reduce unless you choose to make additional repayments.

Choosing an interest-only mortgage can end up costing you more over the life of your loan because you’re only paying interest on a principal amount that doesn’t reduce at all.

 

Home loans with variable, fixed and split-rates

There are many different interest rates on offer, including:

 

Offset account

By linking a savings account to your home loan, your savings account balance is taken off the amount you owe on your mortgage – and this reduces the amount of interest you need to repay.

For example, if your home loan is $400,000 but you have savings of $23,000, in your offset account, the interest is only calculated on the $377,000.

 

Redraw facility

Having a redraw facility allows you to pay extra money into your loan that you can take out (or redraw) later if you need it.

The extra money you pay into the loan reduces your loan balance, which then reduces the interest you pay.  Your loan balance will still reduce each month – according to your original repayment terms of your loan.

Some credit providers may impose conditions or a fee to redraw funds so check with your finance broker to ensure you are on-the-ball with all your terms and conditions.

 

Line of credit loans

This type of loan is where you operate within a set credit limit and can spend up to that limit.

Usually, your wages and any other credit payments would be paid into the account and all your bills and expenses would be paid out of the same account. This tends to work best in conjunction with a credit card.

The limit on the line of credit is fixed and it’s important to note that it does not reduce as you repay your loan. This gives you the ability to always draw up to the arranged limit. The loan will need to be repaid in full eventually – and the specified date is something you need to plan for.

If you’re a very disciplined and careful budgeter but may have irregular income, this can be a good option.

Additional features often mean extra costs

It’s sensible to note that extra features that add flexibility to your loan can also add extra costs. Weigh up the pros and cons to make a choice that suits you.

The range of other available finance options is potentially huge and depends on your own unique circumstances, including work situation and credit history. From bridging loans to personal loans, and business loans to utilising credit card limits – selecting the best finance option for you is as personal as you are. Establishing a relationship with a finance broker you can trust is a great start – something that will help you make the right decision after you understand all your options.

 

If you have any questions about your finances, either personal or business, please do not hesitate to contact Loans Actually on (03) 8805-1850 or email glenn@loansactually.com.au

 

 


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