Bank Loan Types
What Bank Loan Types are Available
There are numerous different bank loan types available in Australia and with a little bit of research you should be able to choose the one the suits your particular needs. You should be aware that because each loan type has a different degree of risk for the lender the interest rate and associated fees will varying accrodingly.
For example home loans are considered the lower risk of all bank loans so their interest rate is the lowest available on the market. This is because house prices in Australia and relatively stable and if you have trouble paying off your home loan then the bank is confident that they will be able to recover the amount of the loan by selling the house.
By the same token unsecured personal loans pose the greatest risk to the banks, so their interest rate is one of the highest going around. This is because there is no tangible assets that banks can sell off if your default on your loan repayments.
The following is a list of the bank loan types that you can apply for in Australia :
- Home Loans - There are many different types of home loans available.
- Variable Home Loans
- Fixed Home Loans
- Line Of Credit Loans
- Home Loan Offset
- Low Doc Loans
- Investment Home Loans
- Interest Only Home Loans
- Construction Loans
- Self Employed Loans
- First Home Loan
- Car Loans
- Personal Loans - There are 2 different types of personal loans.
- Unsecured Personal Loan
- Secured Personal Loan
- Student Loans
- Business Loans
- Margin Loans
- Payday Loans
Questions to Ask About Bank Loans
Regardless of which bank loan you choose there are a number of standard questions that are common to all types of loans. It is important that you get as much information as you can from the lender before you decide to take out a loan. So make sure that you ask the lender all of these question below before you decide to get a bank loan.
- What is the effective interest rate for the loan?
- Can the interest rate change and if so how much notice is given before it does?
- Do you have the option to choice how many years the bank loan is paid back over?
- What are all the extra fees on the loan, including ongoing fees, transaction fees, valuation fees and establishment fees?
- What documentation must be produced in order to be approved for the loan?
- Can you make extra repayments for free and pay off the loan sooner?
- Is there any penalty for paying off the loan sooner?
- What are the exit fees on the loan (very useful if your circumstances change and you want to consolidate or refinance the loan later on)?
- What happens if you miss a payment?
- If you are using a mortgage broker make sure that you ask them what percentage of commission they are receiving from the lender that they recommend and whether or not all of the lenders that they deal with offer them the same percentage of commission?
- Check how many lenders a loan broker has on their books, to ensure that they are able to provide you with the best bank loan on the market?
Tips For All Bank Loan Types
The best tip of all for bank loans is to borrow as little as possible. Try to save up as much as you can before taking out the loan, as this will save you lots of money in unnecessary interest repayments.
Obviously it goes without saying that no matter which loan type you get the quicker you pay it off the better it is for you. In fact it is possible to save thousands of dollars in interest repayments by simply paying a little bit more than you have to off the loan each week or month.
If there is some loan terminology or abbreviations that you are unsure about the meaning off then you can check out the loan definitions page, which has a detailed explaination about some of the more confusing aspects of getting a loan.