Interest Free Loan News

Ask Noel

12 November 2008

I started a self-managed super fund this year and have about $300,000 worth of shares in it. I know that a SMSF can't borrow money. Can I personally borrow to buy shares, which I later transfer (as an off-market transfer) to my SMSF? Will I still be able to claim the interest as a personal tax deduction?.. read full story

Choosing an interest free loan

25 September 2008

Choosing an interest free loan rather than using personal loans when an interest free loan is offered by a retail business can sometimes lead to heavier costs than you would expect... read full story

History of the interest free loan

3 July 2008

Interest free loan schemes in a purely financial sense (as in not designed to sell more of a store's products) do not really exist in much of modern finance, however there are exceptions both historically and today... read full story

Personal Finance

3 July 2008

Q Would you recommend buying an investment property given that interest rates have increased and are forecast to increase further?.. read full story

Interest Free Loan

An interest free loan would be nice, but unfortunately it is not a realistic proposition. Home loans, personal loans and other forms of credit are designed to bring financial institutions a profit from their investment in your needs. Your family and friends are the only ones who would provide you with an interest free loan, and they are unlikely to be capable of lending you a substantial amount. Rather than dreaming of an interest free loan, you should consider ways of increasing your ability to handle interest payments. This site can help you learn more about finance and how you could avoid only being able to afford an interest only loan.

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What kind of loan do you need?

If you’re looking at a major asset, then you can kiss any opportunity for an interest free loan from your family goodbye, but that doesn’t necessarily mean you cannot afford a low interest loan. When first deciding the kind of loan you need, ask yourself what you will use it to pay off. From there you can decide whether you need a personal loan or a home loan, after which you can further decide on more specialised loans.

If you need a personal loan, then there are a few options you have to reduce the interest and get closer to an interest free loan. You may choose to secure your loan with an asset such as a car or house. This routinely means a slightly lower interest rate than with an unsecured personal loan.

You may also have the option of a variable or fixed rate. A variable rate will rise and fall according to general financial conditions, while a fixed rate will have a brief term where the interest rate cannot vary. If interest rates are set to rise, a fixed rate will likely be detrimental in the long run. If interest rates are set to fall, a fixed rate may offer a saving. Consider talking to a financial advisor if a fixed rate interests you, as they will be more aware of the pros and cons than you are.

The interest on home loans can be reduced in a few ways, but you must first decide whether the property is an investment primarily or if it is mostly for domestic use. If you are buying an investment property, you may be interested in an interest only loan, which has you pay off just the interest for the loan term, after which you pay off the balance. When used correctly, this can maximise profits from the sale of investment properties.

If the property is going to be your home, then you will need to apply methods of reducing interest payments. A popular technique is to choose a loan with a redraw facility and then put all your funds into the mortgage. You then pay for normal spending on your credit card and repay your credit card entirely at the end of each month.

Interest free days on purchases with your credit card should mean that you aren’t charged interest on your expenditure, but you should reduce the interest charged on your mortgage. Interest is calculated on your mortgage daily, so keeping the greatest amount of money in your mortgage at any particular time should help you to make big savings in the long term. Certainly a large interest reduction if not exactly an interest free loan.

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