CrediFlex Finance Loan Types

CrediFlex Finance has provided information on the different types of loans that may be suitable for you. Information includes the benefits and the disadvantages of each type of loan.

Which loan type do you prefer?

Loan Structure	Benefits	Disadvantages
Standard Variable Loans The interest rate can vary throughout the term of the loan - both up and down. The term is usually up to 30 years.	If interest rates fall, your repayments will also come down. Most borrowers elect to keep their repayments the same, so they repay their loan quicker. You can normally make additional repayments without incurring a penalty. Often has more features than other types of loans - flexible.	If interest rates rise you will usually have to make higher repayments.
Loan Structure	Benefits	Disadvantages
Basic Variable Loans Many lenders now offer basic variable loans with lower interest rates than standard variable home loans but with fewer features.	Price - basic variable loans have a relatively low interest rate. Repayments are lower than standard variable loans due to lower pricing.	Most of these loans do not offer the same range of features or flexibility as standard variable loans. For example -penalties to repay, higher costs to convert, non-portable.
Loan Structure	Benefits	Disadvantages
Fixed Rate Loans With a fixed rate loan your interest rate and repayments are fixed for a set period, usually between one and five years. Most fixed loans automatically default to a variable loan at the end of the term, but can rollover to another fixed term by contacting your Broker.	Your interest rate is guaranteed for the full fixed rate term. Your repayments will be fixed for the period of the loan.	In periods of decreasing interest rates, your interest rate is locked for the fixed term. Fixed loans either do not allow additional repayments without penalty or limit the amount of additional repayments, which can be made without penalty (usually max $10K). There can be penalties for changing from a fixed rate loan to a variable interest rate, or changing lenders, before the fixed term is over. Payout penalties normally apply.
Loan Structure	Benefits	Disadvantages
"Lo Doc" Loan Many lenders now offer a basic variable home loan where there is no income verification required. These loans are primarily for self-employed and investors who may have difficulty in verifying income (non completion of tax returns etc).	Can borrow up to 80% with no income verification. Loans available despite incomplete taxation details, outside DSR guidelines for investors, business showing paper losses or recent structure changes. Interest rates variable - rise and fall with the movement in interest rates.	Generally higher interest rates due to higher risk for lender. Limited lending ratio to max 80%. Not available for consumer credit applications. Redraw / line of credit not generally available.
Loan Structure	Benefits	Disadvantages
All-in-One Loans All-in-One loans are typically variable interest rate loans that allow you to deposit all of your income into the loan and then withdraw money from the loan account for all your day-to-day purchases and transactions. An excellent way to reduce interest costs provided you are a disciplined spender.	It operates like a transaction account. Most All-in-One loans provide convenient access to the loan account such as a chequebook and debit cards for ATM and EFTPOS transactions. Using your home loan as your transaction account can reduce the number of accounts and reduce interest costs.	You may have to pay a premium for the flexibility of an All-in-One loan such as a monthly fee or higher interest rate.
Loan Structure	Benefits	Disadvantages
Introductory Loans or “Honeymoon Loans” The interest rate is usually low to attract new borrowers to the lender. Introductory loans normally have a period of two years or less with most being for 12 months. Introductory loans can be fixed, variable or capped rates.	Low interest rates available. Generally a “no frills” loan, however some banks provide an offset account on these loans.	Payments may increase when the initial period expires. If you have a fixed introductory rate and interest rates fall you could be locked into higher rates. Fixed rate loans may require a period of variable rate at expiry of the initial “Honeymoon” period.
Loan Structure	Benefits	Disadvantages
100 Percent Offset 100 percent offset are a separate savings account run in conjunction with your home loan. You receive no interest income from accumulated savings, rather this amount is “offset” against the loan balance. For example, if you had a $100K home loan and $100K cash in your offset account, you would pay no interest on your home loan.	It operates like a transaction account. It will generally have a cheque facility and a debit card which allows you to make ATM and EFTPOS transactions. The effective interest rates on 100 percent offset accounts are higher than other accounts.	Fees and charges and / or a higher interest rate is normally applied to this structure. Some minimum balance requirements may be applicable.
Loan Structure	Benefits	Disadvantages
Combination Loans A combination loan is where the borrower takes a portion of the total amount borrowed under one loan product and the remainder under another e.g. half the amount borrowed under a variable interest rate and the other half under a fixed rate. Also known as a “Split Loan”.	The fixed portion provides you with repayment certainty. The variable portion provides you with repayment flexibility - you can pay off as much as you like, when you like. You have flexibility to choose fixed / variable portions.	Fluctuating interest rates effect the variable portion of the loans. You could end up paying a higher interest rate (i.e. higher than the market rate) if you fix and rate reduce.
Loan Structure	Benefits	Disadvantages
Line of Credit This is a line of credit, which is secured by a mortgage over a residential property. With a line of credit it is possible to draw down to the set credit limit as required for any worthwhile purpose.	You can use the money as you need it and pay it back when you can. Interest rates are usually lower than for credit cards or personal loans. Credit limits are usually higher than for credit cards or personal loans.	Unless care is shown it is possible to reduce the equity you have built up in your home. This facility is only for the borrower who is a disciplined spender.