With so many different types of loans available, it can be tough to know which one is right for us. In this article, we’ll take a closer look at Standard Variable Loans and help you understand if they’re the right choice for you.
What Are Standard Variable Loans?
A Standard Variable Loan is a type of loan where the interest rate can fluctuate over time. This means that the amount you repay each month may go up or down depending on changes to the interest rate. Standard variable loans are the most popular home loan in Australia. Interest rates go up or down over the life of the loan depending on the official rate set by the Reserve Bank of Australia and funding costs and the individual decisions of each lender. Your regular repayments generally pay off both the interest and some of the principal.
Standard Variable Loans are often used for mortgages, but they can also be used for other types of borrowing, such as personal loans.
One of the benefits of a Standard Variable Loan is that they often have more flexible terms than other types of loans. For example, you may be able to make extra repayments or pay off your loan early without incurring a penalty fee.
How Do Standard Variable Loans Work?
When you take out a Standard Variable Loan, your lender will set an interest rate. This interest rate can change at any time, depending on market conditions. If the interest rate goes up, your repayments will increase, and if the interest rate goes down, your repayments will decrease.
The amount you can borrow with a Standard Variable Loan will depend on a range of factors, including your income, credit score and the value of the asset you’re borrowing against (if you’re taking out a secured loan).
Is a Standard Variable Loan Right for You?
Whether or not a Standard Variable Loan is the right choice for you will depend on your individual circumstances. Here are some things to consider:
- Interest Rates: Because the interest rate on a Standard Variable Loan can change, it can be hard to predict what your repayments will be in the future. If you’re on a tight budget and need to know exactly what your repayments will be each month, a fixed-rate loan may be a better choice.
- Flexibility: If you want the flexibility to make extra repayments or pay off your loan early without incurring a penalty fee, a Standard Variable Loan could be a good choice.
- Risk: If you’re risk-averse and prefer certainty, a Standard Variable Loan may not be the best option for you.
How to Get the Best Deal on a Standard Variable Loan
If you’ve decided that a Standard Variable Loan is the right choice for you, there are several things you can do to ensure you get the best deal possible:
- Shop Around: Don’t just take the first offer you receive. Shop around and compare interest rates and fees from different lenders to find the best deal.
- Negotiate: If you have a good credit score and a stable income, you may be able to negotiate a better interest rate or loan terms with your lender.
- Consider a Mortgage Broker: A mortgage broker can help you find the best deal on a Standard Variable Loan. They have access to a range of lenders and can help you navigate the loan application process.
In conclusion, a Standard Variable Loan can be a flexible way to borrow money, but it’s not right for everyone. If you’re considering taking out a Standard Variable Loan, make sure you understand the risks and benefits and shop around to find the best deal. Consult with John MacMaster to understand which type of loan is best for you.