Interest Free Loan Types
There are various interest free loan types offered by the many lending institutions in Australia. Each loan type is suitable for a purpose and has its own pros and cons. People who are planning to get a loan should first consider the available loan types before deciding on which they would get. This would help in using minimal cash needed and allowing for current and foreseen income budgeting.
Investor Loans are one of the most common types available in the market. They are usually bundled with other loan products from the lending institution. Its interest rates are lower since the amount has dropped over the years. The benefits and fee should be considered when choosing this loan type.
Fixed Rate Loans have a specified interest rate for a specific amount of time, regardless of movement in market interest rates. This allows the borrower to budget for a longer term. However, some lending institutions set an exit penalty if the borrower pays the loan earlier than the set period.
Variable Rate Loans has interests that are much lower than other loan types since it is affected by movement in the Reserve Bank of Australia's cash rate. One of its advantages is the probable lower interest payment if rates decrease but it is also subject to rate hikes if the interest goes higher.
Line of Credit Loans lets the borrower get extra funds by drawing on the home's equity. It is a very flexible interest free loan type which allows the borrower to better manage repayment periods. But, its flexibility may come at a higher cost.
Low Doc Loans are usually taken by those who are self-employed. It lets people with irregular income to apply for loans. Since this is a loan with high risk, lending institutions may put a higher interest rate on it.
No Doc Loans are almost the same with Low Doc Loans but need lesser documents. It is suited most for self-employed people who wish not to disclose their income. However, lending institutions may not properly assess the borrower for loan repayment.
Equity Release Loans are the latest loan types in Australia. It is suited for those aged 65 years or older. It can give access to a retirement income stream while letting the borrower retain home ownership. But, borrowers must be cautious since they may withdraw more equity than the home value which will lead to the lending institution having the rights to the house.
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