When choosing a suitable loan, there are a broad range of different features and benefits to consider. Knowing what’s available can help you make a well informed decision based on your financial situation and needs.
This is the most common form of loan account, which generally includes a number of the features below, with no extra charges for usage.
Basic loans generally have an interest rate somewhat lower than a standard loan, however, the loans either come with less features, or there are fees to use selected features. In comparing between a standard and basic loan product, you will need to consider your expected usage patterns.
Line of credit / equity access
These accounts provide you with a “reserve” of credit on your account, than can be drawn down at any time. Some line of credit loan accounts have more flexible repayment alternatives, providing a benefit of allowing you to manage your cash flow better. Most lenders charge extra for line of credit accounts, either by way of a facility fee, undrawn funds fees and/or a higher interest rate. In many cases, a standard loan with redraw can provide features similar to a line of credit at lower cost, so make sure you compare the options carefully.
A redraw facility allows you to make additional withdrawals from your loan account. The amount you can redraw is generally limited to any additional repayments that you have made during the course of the loan. Some lenders impose a minimum redraw amount, limited number of free redraws, or charge fees per redraw.
Some loan accounts allow you to withdraw money from your account, as a redraw. The ways you can do this include: internet, telephone, cheque, direct debit, Bpay, ATM and EFTPOS. Many lenders restrict the number of free transactions, for different withdrawal methods, that you can make each month.
Lenders provide many different options for depositing money into your loan account, to make the minimum repayments and extra repayments. Most loan accounts allow you to do this in a number of ways including: salary crediting, direct credit, internet, telephone, cheque and Bpay. Because of the flexibility and ability to save interest, some people choose to use their loan account like a transaction account, by paying all of their salary in and then making outward payments as required.
This facility offers a sub-account into which you can deposit spare money. Prior to calculating the interest charge on your loan account, the balance of the offset account is netted off against your loan account, meaning that you save interest.
Many lenders offer packages that provide a range of products, such as a loan account, credit card and savings account, along with a discount on your home loan. The downside is an annual fee, which typically ranges from $300 to $500 per annum. Whether these accounts will work for you is really a game of algebra; to be worthwhile, the interest savings and other fee savings must outweigh the annual fee.
This facility allows you to stop making repayments for a while, provided that you have extra funds available as a result of making additional repayments.
This facility allows you to increase the credit limit of your existing loan account. Most lenders will require an abridged application and they will reassess their credit decision, following all or some of the steps in “How will the lender make the decision to lend me money”.
This facility is designed to help if you decide to sell your existing home and buy a new one. Portability allows the new property to be set up under the old loan. Before utilising the portability facility, it’s probably a good idea to shop around, because it is possible that there may be more competitive loan deals on the market. An advantage of portability is a potential ability to avoid deferred establishment fees in discharging your old loan and to avoid establishment fees in setting up a new loan. However, keep in mind that there may still be some government fees to be met.
A loan specifically to purchase vacant land, often combined with options for construction.
Construction & renovations
A loan to finance construction or renovations. Usually will include conditions that you must draw down the funds in stages, coinciding with the completion of different stages of the building activity. Be sure to check if the lender charges fees for progress payments.