Types of Finance

Buying a home or investing in your business is probably one of the biggest and most important purchases you will make in your life. To make it a smooth, successful process, you need to surround yourself with a team of people who really know what they’re doing – experts with the know-how to help you make the right decisions. You can trust Propel Finance to provide you plenty of options that fit your needs, at competitive rates that save you money.


To start off, it is always nice to have the appropriate information at your finger tips. Below is a list of finance options that may be suitable for your situation. Have a look and please contact us directly so we can go over things with you in more detail.


• Standard Variable Loan
  Standard variable loans are Australia’s most popular type of home loan. The interest rate varies throughout the standard variable loan term. These loans generally offer excellent flexibility, low fees, and often offer great features such as an offset facility, redraw facility, no limits on additional repayments and in most cases, no early pay-out penalties.

  Advantages of a standard variable loan:
  •    Flexibility
  •    Lump-sum payments can be made without incurring a penalty.
  •    If interest rates fall, your repayments will fall.
  •    Often offer extra features.

  Disadvantages of a standard variable loan:
  •    If interest rates rise your repayments will increase.
  

• Basic Variable Loan
  A basic variable loan typically offers lower interest rates and fewer features than the standard variable loans. You often have the option to pay for any additional features required. Interest rates and repayments of a basic variable loan will vary throughout the loan term.

  Advantages of a basic variable loan:
  
•    Relatively low interest rate.
  •    Lower repayments.

  Disadvantages of a basic variable loan:
  
•    Many of these loans do not have the same features or flexibility as other variable loans.
  

• Intro Rate Honeymoon Loan
  An introductory rate loan is also known as a honeymoon loan. Generally the honeymoon rate loan offers a lower rate for an initial period of time (usually 12 months) after which most will revert to the standard variable rate. The rate can be fixed or variable.

  Advantages of an introductory rate loan:
  •    Usually the lower rates on the market.
  •    Some lenders provide offset accounts on these loans.
  •    Opportunity to reduce the principal quickly during the ‘honeymoon’ period.

  Disadvantages of an introductory rate loan:
  •    Payments will increase after initial introductory (honeymoon) period.

• Fixed Rate Loan
  Under a fixed rate loan, the interest rate is fixed for a specified period. Usually this time frame is between one and five years. A fixed rate loan gives you the certainty of knowing exactly what your monthly repayments will be and peace of mind knowing the repayments won’t rise. However, you won’t benefit if rates go down during the fixed term.

  Advantages of a fixed rate loan:
  •    Guaranteed rate, if interest rates rise your repayments won’t.

  Disadvantages of a fixed rate loan:
  •    Reduced flexibility.
  •    Extra repayments may incur a fee or be limited.

• Low-Doc & Credit Impaired Loan
  A low documentation (or no documentation) loan is suited to investors or self-employed borrowers who do not meet the standard lending criteria. This may include; those with an impaired credit history, those who are unable to provide the required documentation in support of their loan application, or those who wish to borrow more than 100% of the property value.

  Advantages of a low-doc loan:
  •    Simple income declaration form.
  •    No tax returns.
  •    No financial statements.
  •    Can have features such as redraw, line of credit, variable or fixed rates, principal and interest or interest only.

  Disadvantages of a low-doc loan:
  •    Generally a higher interest rate.

• Construction Loan
  If you are building your own home or investment property, a construction loan may be suitable for you. This kind of loan requires a fixed price building contract from a registered builder. These loans are usually interest only for the period of building and then become principal and interest once building is completed.

  A construction loan allows you to draw money as is required whilst building. Also, with the usual necessary documents required when applying for a loan, construction loans also require a fixed price building contract and council approved plans.

  Advantages of a construction loan:
  •    Competitive variable interest rates.
  •    Facility to draw money when necessary, whilst building.
  •    Interest only payments during the building period.
  •    Additional payments can be made.

  Disadvantages of a construction loan:
  •    Requires a fixed price building contract leaving little room for change whilst building.
  •    Some lenders charge a fee for every time you draw money whilst building.
  •    Given it is a variable loan, loan repayments will increase if interest rates go up. 

• 100% Offset Account
  A 100% offset loan is very similar to an all-in-one loan. Rather than putting all your salary and other income into your loan, it goes into an offset account that is directly linked to your home loan. Any balance in the offset account is 100% ‘offset’ against your home loan. This reduces the amount of interest you have to repay, making your money work harder for you.

  Advantages of an offset loan account:
  •    It can save you substantial amount of interest if used correctly.
  •    Operates like a normal transaction account and has a chequebook, ATM card, etc. attached.

  Disadvantages of an offset loan account:
  •    May have higher monthly fees attached to the account.
  •    May require a minimum balance in the account.
  

• Line of Credit Loan
  A line of credit loan provides you with access to the equity in your home or investment properties up to a pre-approved limit. You access the funds as you need to. The interest rate on a line of credit loan is usually a variable rate and repayments are interest only.

  Advantages of a line of credit loan:
  •    You can use the money when you need it and pay it back when you can.
  •    Rates are generally lower than a personal loan or credit card.

  Disadvantages of a line of credit loan:
  •    Unless care is shown it is possible to reduce the equity you have built in your home.