June 05, 2015
With historically low interest rates a current topic of conversation, many clients are asking the question: Do we fix our loan or is it better to have a variable rate?
Which loan is right for me?
Well, that all depends on your circumstances. Variable and fixed loans have their advantages and disadvantages so it’s imperative to consider these before making a decision. Split loans combine features of both variable and fixed loans allowing you to broaden your options.
For more information contact Richard Windeyer on 1800 01 LOAN or click here to "Book a Meeting"
- When the Reserve Bank lowers the cash rate lending institutions may pass these savings on to you in lower interest rates. But not always.
- You can make additional repayments without incurring a penalty then have the option to redraw the additional funds at a later date.
- Provides more flexibility than other types of loans.
- When the Reserve Bank or lending institutions increase rates, the interest rate on your loan will also increase - meaning you will pay more interest.
- If interest rates increase during the fixed period, your loan interest rate and repayments will not rise. Loans can typically be fixed for periods between 1 to 5 years.
- Budgeting is easier by offering the predictability of a set repayment each month and giving you security over your financial situation.
- When interest rates go down, the rate on your loan will remain the same so you won’t have the benefit of potential savings.
- Some fixed loans may limit the flexibility of being able to make extra repayments to repay your loan early. It's also possible you may not be able to redraw the extra repayments during the fixed rate period.
- If you choose to exit or switch your loan, before the end of its term there may be early termination fees.