Australian Credit Licence # 385139


 
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Australian Credit Licence Number 385139
copyright © 2007 Fort Knox






Types Of Loans

Standard Variable Loan

Basic Variable Loan

Intro Rate 'Honeymoon' Loan

Fixed Rate Loan

Professional Packages

No Deposit Home Loan



100% Offset Loan Account

Line of Credit Loan

Low-Doc & Credit Impaired Loans

Construction Loans

Commercial Hire Purchase & Leasing

Standard Variable Loan

Standard variable loans are Australia's most popular type of home loan. The interest rate varies throughout the loan term. These loans generally offer excellent flexibility, low fees and often offer great features such as an offset facility, redraw facility, no limits on additional repayments and in most cases, no early pay-out penalties.

Advantages:

* Redraw
* Flexibility
* Lump-sum payments can be made without incurring a penalty.
* If interest rates fall, your repayments will fall.
* Often offer extra features.

Disadvantages:

* If interest rates rise your repayments will rise.


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Basic Variable Loan

Basic variable loans typically offer lower interest rates and fewer features than the standard variable loans. You often have the option to pay for any additional feature required. Interest rates and repayments will vary throughout the loan term.

Advantages:

* Relatively low interest rate.
* Lower repayments.

Disadvantages:

* Many of these loans do not have the same features or flexibility as other variable loans.


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Intro Rate 'Honeymoon' Loan

An introductory rate loan generally offers a guaranteed low rate for an initial period of time (usually 12 months) after which most will revert to the standard variable rate. The rate can be fixed or variable.

Advantages:

* Usually the lowest rates on the market.
* Some lenders provide offset accounts on these loans.
* Opportunity to reduce the principal quickly during the 'honeymoon' period.

Disadvantages:

* Payments will increase after initial introductory/'honeymoon' period

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Fixed Rate Loan

Under a fixed rate loan, the interest rate is fixed for a specified period, usually between one and five years. This loan gives you the certainty of knowing exactly what your monthly repayments will be and peace of mind knowing the repayments won't rise. However you won't benefit if rates go down during the fixed term.

Advantages:

* Guaranteed rate, if interest rates rise your repayments won't.

Disadvantages:

* Reduced flexibility.
* Extra repayments may incur a fee or be limited.

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Professional Packages

Members of certain professions are as seen as favourable candidates for lending by some banks. As such these lenders may extend to you what is known as a professional package. This may include features such as reduced interest rates, no or reduced fees and so on. Typically this type of package was offered to doctors and the like but they are now more prevalent. You may find you are eligible for a professional package and it's benefits. Talk to one of our consultants to find out.

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No Deposit Home Loan

A no deposit home loan is exactly that - you are able to borrow 100% of the purchase price. You will only need to find the funds to cover the expenses of the purchase such as stamp duty and legal fees.

For some clients it may be difficult to come up with these expenses. If you fall into this category our 106% home loan product may be suitable. With this product you are able to borrow the full amount of the purchase price plus up to another 6% to cover the costs of the purchase. Getting into your own home has never been easier.


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100% Offset Loan Account

A 100% offset loan is very similar to an all-in-one loan. Rather than putting all your salary and other income into your loan, it goes into an offset account that is directly linked to your home loan. Any balance in the offset account is 100% 'offset' against your home loan. This reduces the amount of interest you have to repay, making your money work harder for you.

Advantages:

* Can save you substantial amount of interest if used correctly.
* Operates like a normal transaction account and has a chequebook, ATM card, etc. attached.

Disadvantages:

* May have higher monthly fees attached to the account.
* May require a minimum balance in the account

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Line of Credit Loan

A line of credit loan provides you with access to the equity in your home or investment properties up to a pre-approved limit. You access the funds as you need to. The interest rate on a line of credit loan is usually a variable rate and repayments are interest only.

Advantages:

* You can use the money when you need it and pay it back when you can.
* Rates are generally lower than a personal loan or credit card.

Disadvantages:

* Unless care is shown it is possible to reduce the equity you have built in your home.

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Low-Doc & Credit Impaired Loans

A low documentation (or no documentation) loan is suited to investors or self-employed borrowers who do not meet the 'standard' lending criteria. This may include; those with an impaired credit history, those who are unable to provide the required documentation in support of their loan application.

Advantages:

* Simple income declaration form.
* No tax returns.
* No financial statements.
* Can have features such as redraw, line of credit, variable or fixed rates, principal and interest or interest only.

Disadvantages:

* Generally a higher interest rate.

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Construction Loans

If you are building your own home or investment property, a construction loan may be suitable for you. This loan requires a fixed price building contract from a registered builder. These loans are usually interest only for the period of building and then become principal and interest once building is completed. A construction loan allows you to draw money as is required whilst building. Also, with the usual necessary documents required when applying for a loan, construction loans also require a 'fixed price building contract' and 'council approved plans'.

Advantages:

* Competitive variable interest rates.
* Facility to draw money when necessary whilst building.
* Interest only payments during the building period.
* Additional payments can be made.

Disadvantages:

* Requires a fixed price building contract leaving little room for change whilst building.
* Some lenders charge a fee for every time you draw money whilst building.
* Given it is a variable loan; loan repayments will increase if interest rates go up.

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Commerical Hire Purchase and Leasing

Leasing

Trying to figure out which finance product is right for you can be confusing. In fact, we recommend discussing your situation with your tax professional. However, to simplify your decision process we outline the choices available to you here.

Lease products fall into two categories as either a finance lease or operating lease. They differ in the way they treat ownership, disposal and residual risk on the vehicle. Hire purchase options are available and function in a similar fashion to a loan to purchase an asset.

In order to decide on the most appropriate type of finance you first need to consider the following:-

  • Do you wish to own the asset at the end of the lease period?
  • Do you use the asset for business purposes more than 50% of the time?
  • Are you looking to finance the vehicle only, or do you also want a range of fleet management services?
  • How long do you intend to keep the vehicle and how many kilometres will you travel?
  • Do you want or need to show the asset on the company balance sheet?

Finance lease

A finance lease is a form of rental agreement under which you lease an asset for an agreed period and rental. A residual value is set upfront to reflect the asset’s value at the end of the term. This Accounted for on the balance sheet.

Under the conditions of most finance leases you have no option or right to purchase the asset. However it is common practice that most financiers will consider an offer from you to purchase the asset at the end of the term for the residual value. Alternately, you may trade it in on a replacement, return it to the financier paying the difference between the residual and market value (residual risk) or even extend the lease for a further term.

Operating/Maintained lease

A fully maintained operating lease offers an organisation the benefits of a hassle free method of vehicle usage.  It is finance not shown on the balance sheet and in one monthly payment takes care of all costs associated with the vehicle i.e., all costs in relation to maintenance, insurance, finance are included.  Once you decide on the motor vehicle required you simply decide on the length of the lease required and calculate how many kilometers you will travel in each year.  Based on this the financier will calculate a monthly repayment.  At the end of the lease term you hand the vehicle back to the lender with no residuals or balloon payments required. 

Commercial hire purchase

Commercial hire purchase (CHP) is an agreement between the purchaser and the financier whereby the financier owns the vehicle or equipment during the hiring period. It differs from a finance lease in that the goods automatically become yours once all terms of the agreement have been completed – usually when the final installment is paid.  As such it is finance taken out by a business when they wish to purchase the goods.

A CHP can be arranged with or without a final balloon payment at the end of the term depending on what your budgetary requirements are. The repayments are fixed for the term of the CHP. An upfront deposit or trade-in, which will reduce your rental commitments, is optional. It is accounted for on the balance sheet.

Chattel mortgage

Similar arrangement to a hire purchase but with specific GST benefits, which in certain circumstances will allow the entire GST proportion, be claimed in the first BAS period after purchase. Loan structure can be tailored in a similar fashion to a CHP or finance lease

Novated lease (salary packaging)

It is an agreement between an employee, the employer and the financier. The lease is taken out in the name of the employee and the employer agrees to take on the repayment responsibilities for the duration of the employee’s employment. It is not recorded on the balance sheet of the employer.

If the employee leaves this employer, the lease may be transferable to a new employer or the employee can take on the responsibility of the repayments. The original employer no longer has any financial responsibility and is not left with a vehicle they do not require.

The benefit to the employee may be the reduction of tax as a result of having the repayments made out of pre-tax dollars. There may be fringe benefits tax consequences (based on the vehicle value and kilometres travelled) as a result of the transaction between the employee and the employer, so advice from your tax professional is recommended. Similar to a finance lease, residual risk rests with the employee.

 

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