Loans can be a confusing area of finance particularly if you have not experienced the application process.
This article is going to outline the primary types of loans, what differentiates them and what each is typically most suitable for. You can use this information to begin considering what might be best for you in your property journey, and also to help you understand which areas your mortgage broker can support you.
Firstly, what is a loan?
In finance, a loan is an amount of money that is given by an individual, institution, or other entities. The way that the person lending the money benefits is by charging an interest rate. The amount of interest charged can vary depending on the time, who is lending the money, the credit rating of the person borrowing the money, and a few other factors.
Here’s an outline of the three most common types of loans:
1. Home Loan
A home loan is a loan used for the purchase of a house. Typically these loans are repaid within a 25-30 year time frame.
This type of loan is ideal for anyone in each of these categories:
– A single person, a couple, or a family, looking to your get their first foot on the property ladder,
– A growing family in need of more space,
– A later stage family looking to downsize,
– You have an existing mortgage and you’re wanting to refinance,
– Or you want to re-mortgage your home and use your equity to renovate.
2. Investment Loan
An investment loan is a borrowed amount that is used to purchase a home, not to live in, but to own as an investment.
This type of loan works for anyone looking to invest in:
– An apartment,
– A unit,
– A townhouse,
– A house,
– A commercial or industrial property,
– A block of land,
– Or a residential development
3. Commercial/business loan
These types of loans are used to grow and expand your business.
In business, you might need:
– An overdraft to assist with ongoing cash flow,
– A short-term loan to pay a tax debt or outstanding creditors,
– A business loan to purchase a commercial property, business assets, funding for projects, debt refinancing or even complete a fit-out,
– An inventory loan to assist with purchasing stock,
– Any other type of commercial or business loan that you may need.
The role of your mortgage broker is to listen to your needs and to use their expertise to uncover the most suitable type of loan available to match those needs. The next task is for them to research and negotiate and find the best possible interest rate for your loan on your behalf, to minimise your repayments.
Mortgage brokers can be extremely helpful in this area as they’re able to draw on pre-existing relationships and contacts and years of experience and knowledge to deliver you the best possible deal.
If you or your business are looking for a trusted partner to help you build wealth and secure your financial future, you can book a complimentary consultation with the Fuda Finance Team and start your journey to financial freedom today.
