Get the Most Out of Your Loan with These Tips
Most people don’t realise that they have options when it comes to their loans.
If you’re looking to take out a loan, you can do a few things to ensure you secure a competitive option. In this blog post, we’ll discuss tips on getting the most out of your loan. We’ll cover topics such as types of loans, loan terms, loan purposes, and loan features. We’ll also provide some advice on researching loan options, comparing rates and terms, and considering your needs. Finally, we’ll offer some tips on creating a budget, getting pre-approved, and shopping around.
Understanding the different options can be confusing, but our award-winning team of brokers are here to help. If you are looking to finance your first or final property, we can talk you through a variety of options that could potentially save you money on your loan.
Types of Loans
Many types of loans are available, each with its own set of terms, conditions, and features. The most common types of loans are mortgages, car/vehicle loans and personal loans.
Mortgages are long-term loans that are used to finance the purchase of a property. The loan is secured by the property itself, which means that if the borrower defaults on the loan, the lender can foreclose on the home and recoup their losses. Mortgage terms can range up to circa 30 years, and interest rates can be fixed or variable.
Car loans are another common type used to finance a new or used vehicle purchase. Like mortgages, car loans are typically secured by the vehicle being purchased. These loan terms are shorter, but interest rates tend to be higher than mortgages.
Personal loans are unsecured loans that can be used for various purposes, such as consolidating debt or financing a large purchase. Personal loan terms usually range from 2 to 7 years. Because personal loans are unsecured, they tend to have higher interest rates than secured loans.
Loan Terms
The term of a loan is the length of time over which it is repayable. Depending on your loan product, loan terms can range from a few months to several decades. Understanding how the term affects how much you’ll pay in the short-term and the long run is important.
If you are comparing loan terms, you may want to consider:
- The total interest you will pay over the life of the loan
- Your monthly payment amount
Shorter terms generally result in higher monthly payments but lower total interest costs; longer terms vice versa.
You need to find the right balance that you are comfortable with. If you can pay your loan off sooner, you will most likely pay less interest. However, having high repayments could be hard to manage if something unexpected comes up.
Loan Purpose
Depending on the purpose of the loan, different types of loans may be better suited. For example, a short-term personal loan may be better if you need money for an emergency expense such as an emergency repair not covered by your insurance.
On the other hand, if you are looking to finance a big-ticket item over an extended period of time, like a new extension or renovation, a long-term loan, such as a mortgage, could be an option.
If you’re not sure which type of loan is right for you, it’s a good idea to speak with your mortgage broker, who can walk you through the different scenarios. Our job is to help you understand the different options available and make a recommendation based on your specific situation.
Loan Features
Not all loan options are created the same! This is why it is best to understand your options so your loan works for you.
- As mentioned earlier, if you are looking for a loan with low monthly payments, you may want to consider a loan with a longer term.
- However, keep in mind that a longer-term loan will have a higher interest rate, and you will end up paying more in interest over the life of the loan.
- Another option to consider is whether you want a fixed or variable interest rate loan.
- Fixed-rate means that you have a contract with your lender that your rates are locked for a certain period of time, despite any fluctuations in the market
- With a variable rate loan, you have more flexibility, but your interest rate may fluctuate over time in line with the rates offered by the lender.
- A split loan is where part of your loan has a variable rate, and the other amount is fixed
- This may give you the flexibility to have offset accounts or redraw facilities against the variable portion of your loan
- But at the same time, it allows you the certainty of the fixed rate against the balance of your loan
- Use an alternative lender?
- Our panel of lenders include both bank and non-bank lenders. If you are ‘non-conforming’, such as a Sole Trader without PAYG to demonstrate your earnings, it could be harder to secure a loan
- Alternative lenders are non-bank lenders, who often have a speciality area or more flexible application process such as low-doc loans to accommodate those who may not fit the more ridged criteria of larger banks
How to Get the Most Out of Your Loan
Research Loan Options
When looking for a loan, it is important to do your research and compare different options to get the best deal possible. Many kinds of loans are available, so it is important to find one that best suits your needs.
Compare Rates and Terms
Interest rates and loan terms can vary from lender to lender. Comparing rates and terms from multiple lenders is important before choosing a loan. You can use an online comparison tool as a guide, but these typically are only a snapshot of what is available. Our team is up to date with the latest products and offers and is here to help you find a suitable deal on your loan.
Consider Your Needs
Before taking out a loan, it is important to consider your needs and what you will be using the loan for.
- Will you use the loan for a short-term or long-term need?
- Do you need a fixed-rate loan or a variable-rate loan?
- What is your credit score?
Knowing the answers to these questions will help you choose the right loan for your needs.
Final tips for Getting the Most Out of Your Loan
Create a Budget
When trying to get the most out of your loan, one of the best things you can do is create a budget. This will help you figure out how much money you need to borrow, and it will also help you stay on track after you’ve borrowed the money.
To create a budget, start by looking at your monthly income and expenses. Then, figure out how much money you need to cover your essential expenses like rent, food, and transportation.
Once you know how much money you need for essentials, you can start looking at other expenses like entertainment and savings. Finally, leave some room in your budget for unexpected costs.
Get Pre-Approved
Another tip for getting the most out of your loan is to get pre-approved before you start seriously looking for a home. Getting pre-approved means that a lender has looked at your financial information, and you have an indication of how much they’re willing to lend you.
This can be helpful because it gives you an idea of your budget and a strategy for what you can afford. It can also help speed up the process of getting a loan because your documents are already organised, so when you find the right property, you can be confident that your finances are under control.
Shop Around
Finally, one of the best tips for getting the most out of your loan is to shop around before choosing a lender. There are many different lenders, each offering different rates and terms.
By shopping around, you can ensure you’re getting as competitive a deal as possible on your loan. Our team has access to an extensive panel of lenders and hundreds of loan types and will take the stress and time out of researching your options.
Conclusion
When it comes to taking out a loan, it’s essential to do your research and compare rates and terms from different lenders. You should also consider your needs and create a budget to ensure you can afford the loan payments. By following these tips, you can ensure that you get the most out of your loan.
Our team of award-winning mortgage brokers are here to help you. We understand the market, so you don’t have to!
Disclaimer:
Terms are subject to approved persons only. This information is true and correct as of 15/07/2022. All of the content above is general in nature and may not suit your personal needs, situation objective & goals.
