What Kind Of Loan Is Best For You?
When you're shopping for a loan, you may feel as though you're drowning in information. Loans, lines of credit, variable rates, fixed rates . . . it may seem difficult to pick the product that's best for you.
At AFASA, Your Mortgage Specialists, we're here to help you make the right decision. Our lending officers will be happy to review all of your options and help you to select the loan that will work for you, now and in the future.
Instalment Loan or Line of Credit?
You may wonder which is better for you, an instalment loan or a line of credit. It all depends on your particular borrowing needs.
When Do You Need A Line of Credit?
Above all else, a line of credit offers flexibility. It gives you the opportunity to borrow again and again without reapplying. Borrow as much or as little of your line of credit as you need, whenever you need it.
Of course, this means that the amount you owe can increase or decrease based on whether you've borrowed again or simply made your regular payments. That's why it's wise to consider your spending and credit habits before taking out a line of credit. If you have a history of fiscal responsibility and prudent borrowing, a line of credit gives you the freedom to manage your finances.
Let's say you're remodeling your kitchen and the job will take several months. A line of credit will let you pay the bills - wiring, appliances, wallpaper, cabinet installation - as they come due. Or perhaps you have a child in college and will be making tuition payments over a period of years. With a line of credit, all you need to do is write a check. Of course, you'll want to make sure that your credit limit is high enough to cover your projected needs.
A line of credit is also valuable in the event of an unexpected expense such as car repairs or medical bills. It can act as a safety net to get you through an occasional tight period.
When Is An Instalment Loan Better?
If you have a one-time borrowing need, and prefer an uncomplicated borrowing option, an instalment loan is probably your best bet. Once you receive the check for the loan amount, your borrowing is complete. You simply begin to make your payments and continue making them until the balance is paid off. Your payment will remain the same throughout the term for easy budgeting.
Many borrowers prefer the simplicity of this arrangement. For a new or used car, home improvements, or a special event such as a wedding, an instalment loan gets you the money you need and a payment schedule you can afford.
Because an installment loan does not permit additional borrowing, it can be easier to qualify for one. If you're a first time borrower or don't have an extensive credit history established, it may be easier for you to be approved for an instalment loan.
Fixed Rate or Variable Rate?
Another decision you may have to make when you borrow is whether to go with a fixed or variable rate. There are advantages to both.
A fixed-rate loan is predictable. You know there will be no surprises. The rate that you receive at closing is the rate that you will pay throughout the term of the loan. This makes it easy to budget.
One benefit you won't get with a fixed-rate loan is the ability to take advantage of market rates. If rates go down, you will continue to pay at your higher rate. However, if rates go up, you'll be pleased to be paying your original lower rate.
A variable rate loan lets you take advantage of market changes. If rates go down, your rate drops. Of course, if rates go up, your rate will rise accordingly. Nevertheless, the rate changes won't affect your monthly budget; rate increases result in additional payments due at the end of the loan term rather than higher payments each month.
We're Here To Help.
Contact AFAS, Your Mortgage Specialists, today and we will help you own your new home sooner! To discuss your mortgage options, phone our office today on 07 5527 1133, or fill in our simple contact form and we will be in contact with you within one business day.
To try our loan calculators, click here.
The information presented on this page is general in nature; it is not our intention to provide specific advice to individuals or a comprehensive discussion of the subject matter. We suggest that you consult with your financial or tax advisor, accountant or attorney to obtain specific advice or comprehensive information.
