A guide to common loan features.
Not all Loans are the same and vary on their features and limitations.
Interest only repayments - you only pay the interest portion of the loan, no principle deduction is made to the loan. Commonly used for investment purposes and while loans are in their construction phase.
Extra repayment – is a payment more than your scheduled repayment. Extra repayments lowers your principle balance and lowers the interest charged. By making extra repayments, this allows you to pay off your loan more quickly; even small regular payments will help in the long run.
Weekly or fortnightly repayments – allows you to make your secluded repayments on a more regular basis. This feature can help you budget better by having your repayment fall inline with your pay cycle.
Redraw facility – this allow you to access the extra repayments that you have made . Redraw can differ from lender to lender in the amount that can be accessed; also some lenders do charge a fee to access your additional repayment.
Repayment holiday - You can take a break from repayments, or make reduced repayments, for an agreed period of time. This can be useful for travel, maternity leave or a career change. The down side is that you will incur interest while on a repayment holiday. Costing you more in the long run unless you decide to make extra repayments.
Offset account – An offset account is a transaction account that can be linked to your home or investment loan. The credit balance of your transaction account is offset daily against your outstanding loan balance, reducing the interest payable on that loan.
Offset accounts enable you to make the most of your income and other funds to reduce the interest payable on your home loan.
Direct debit - Repayments are automatically debited from your nominated bank account. This can save you the hassle of remembering to make your repayment on time. Some lenders will also allow you to choose the day that the direct debit will occur, to fall in line with your pay cycle. Helping to ensure that you have enough funds for the payment to go through.
Package Loans -Financial institutions offer packaged home loans combined with other financial products such as a credit card and transaction account with the same Lender. These incentives generally come with a discounted interest rate and lower fees which are combined with the other financial products. It is important to consider the overall cost of the package fee and the benefit that you receive when you make your decision.
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