If you are reading these lines, there is a good chance that you intend, or at least seriously consider taking some type of loan. By now, you have probably noticed how many different types of loans you can find on today's financial market. That is certainly a good thing, since it gives you an opportunity to choose the loan most suitable to your needs and your current financial status. On the other hand, such variety can often prove to be a bit overwhelming and confusing. Therefore, a search tool like the one available to you at this site should definitely provide great help in the process of finding the kind of loan you need at the moment. However, before you begin your search, you should get acquainted with some of the most common types of loans available to citizens of Australia. We will present some of the most frequently used loan types; and in the final passage, you can find the information that apply specifically to pensioners, unemployed citizens and other persons associated with Centrelink.
For many Australians, student loans represent the first contact with the financial market, or at least with the loan concept itself. The basic, most commonly used student loans actually vary a lot, depending on the institution that is offering a loan. This variety does not refer only to different interest rates, but also some other terms and conditions. For example, some institutions require you to start with your payments only after you have graduated. Still, before taking any loan, including the student loan, you should always contact the bank and inform yourself well enough about the loan you are about to take. There are some special, even more affordable student loan types, such as government sponsored Higher Education Contribution Scheme (HECS). These loans does not have any interest whatsoever, meaning you will pay back only the original sum you have received from the program. In addition to that, the payment starts after you have graduated, and only after you have reached certain previously determined income level.
Personal loans can be taken for various purposes. They can be used to pay for a holiday, furniture, wedding, or cover any other expense of your personal choice. The amounts of money that can be borrowed, as well as the payment length vary depending on the lender. Some institutions offer up to 10 years payment period. In any case, these loans almost always have significantly lower interest rate, comparing to credit cards.
Overdraft or Line of credit
These loans are mostly taken for similar purposes as personal loans. The main difference is that overdraft loans are much more flexible. After taking this type of loan, you reserve the option to loan more money later on, whenever you need it. On the other hand, you can decide not to take any additional funds whatsoever. You are paying the interest only for the money you have loaned. The downside of these loans is somewhat higher interest rate, comparing to standard personal loans.
Car loans are usually provided by the car dealership. These loans are tempting to many people, since completing everything at the dealership is much more comfortable than having to visit some third party moneylender. Car dealerships are well aware of that fact, so they usually use it to their advantage, setting the interest rates higher than you could obtain elsewhere. Therefore, you should definitely take time to find yourself a better loan deal, before visiting your car dealer.
When it comes to standard home loans, these loans also vary in terms of interest rates and payment schedules. In case you already possess some real estate, there are several ways to include that asset in the loan deal.
- Home equity loan: If you are in possession of real estate that you have partially repaid, you can use the amount paid to date for a new loan, for buying a new real estate. In other words, the money you have paid on the account of your first loan is transferred to the payment of the new loan.
- Redraw loan or mortgage offset: If you have partially repaid your home loan, you can choose to redraw the money you have paid, in order to use it for house improvements and renovations or some other purpose. You do not have to pay any additional interest rates when repaying the redrawn money; however, you definitely extend the payment of the existing loan, by "going back to the beginning" of your loan payment. That causes the increase of interest rates later in the process.
- Revolving line of credit: This type of loan could be described as a loan very similar to above discussed overdraft personal loan. You can withdraw money from the amount you have paid for your home loan whenever you need. You pay interest rates and fees only for the amount withdrawn. However, these fees and interests can be rather high, so these loans should be used with caution.
These short-term loans usually have very high interest rates. Sometimes you may have to resort to these loans, in absent of the any alternative. Still, if you do so, practice extreme caution in the decision making process.
If your only source of income is Centrelink based (age or disability pensions, parenting payment and so on) , you may have very hard time finding a bank willing to lend you money, or your options might be limited to unfavorable loan types, such as forth-mentioned payday loans.
- Payday loans: These are explained above. As short-term, high interest loans, they can be useful, but you must act with caution if taking such loan.
- StepUp loans: These low-interest loans are intended for people with low income and they are usually granted for purchase of home appliances or similar necessary items. The aim of these loans is to help people avoid taking unfavorable high-interest loans and getting in deeper financial trouble.
- Micro loans: Similar to previous type, these loans are low-amount, low-interest loans, usually used in case of various emergencies.
- Concession cards: Concession cards are granted by Centrelink to some citizens with low income. These relatively small amounts of money are determined in relation to your monthly income and paid accordingly.
- Community Initiatives: With help of Government, some states or cities organize initiatives that include financial counseling and various micro loans intended for helping citizens solve their financial troubles. Contact your community center and ask if they provide such programs.