Standard Variable Loan

This is a common loan option. The variable rate moves with the Federal Interest Rate so can either go up or down. The loan works by taking the amount over a period of time with principal and interest components making up the regular repayment.

These loans usually have a bit of flexibility mixed in allowing the recipient to withdraw from the loan at certain times, pay more than the minimum payments and pay more often than is required.

Basic Variable Loan

Similar to the Standard Variable Loan, the Basic Variable Loan is exactly what it sounds like - basic! This loan option usually comes with a lower interest rate and fewer fees but on the downside - less flexibility. While it may be a good option for new homebuyers or start-up businesses due to the cheaper interest these types of loans can be quite restrictive. If you try to exit a Basic Variable Loan you may end up paying some hefty penalties depending on the financial institution.

Fixed Rate Loan

A loan option designed for the safety-conscious Fixed Rate Loans are a debt instrument that locks the interest rate for a pre-defined period of time. The benefit of this type of loan is that it helps you budget without worrying what your financial situation may look like if interest rates increase.

Fixed Rate Loans usually charge higher interest and if you hear that interest rates are likely to go up it's probably too late to change to this loan option. The bank economists will have already worked the rate increase in.

Hybrid Loan

A hybrid loan is a mix between the Standard Variable Loan and a Fixed Rate Loan. Many people take these out on large amounts splitting them 50/50. It allows the debtor to enjoy the flexibility of half of their loan while the other half ensures some consistency for debt repayments.

This is a great loan if you don't want to take the risk with a Standard Variable and don't want to lock yourself into a Fixed Rate. If you know that you will be receiving large amounts of money at irregular points in time, the Hybrid Loan option will allow you to offset these against your Standard Variable component.

Low-Document Loan

A great loan option for self-employed business people the Low Document Loan doesn't require budget forecasts, or company financial reports and tax returns.

The downside, as you can expect, is usually higher interest rates and larger deposits needed.

Line of Credit

Usually used in a business setting, the Line of Credit option allows the debtor to withdraw funds to an agreed limit. Interest is charged when the funds are in negative territory and usually at the home mortgage rate, much lower than the Standard Variable and Fixed Rate. This can be a great loan option for businesses with irregular cashflows however it will tie up your equity and reduce future borrowings while it is in place.

Interest Only Loan

The Interest Only Loan is great for investment properties where interest charged can be leveraged against a tax return. No principal is paid off with this type of loan so at the conclusion of the term the complete principal amount will need to be paid off.

This is not usually a problem if the asset is appreciating but if home sales decline for a period and money matters become tight it could put a strain on your finances.