As the Australian economy gets back to normal on the back of the COVID-19 enforced shutdowns and restrictions easing, there is an expectation of interest rate rises in the future but borrowers are still sitting in an enviable position.
The official cash rate is still at a record low, of 0.1 per cent. What that means for borrowers is that this is one of the best times since the 1950s to access money.
If you’ve already got a home loan, then you should consider refinancing, to take advantage of the current low cash rate and to make sure you’re getting the very best deal you possibly can.
However, there are also several other benefits to refinancing.
Better Interest Rates
The first thing to understand is what exactly it means to refinance. Basically, refinancing is just taking out a new home loan on the same property.
The first and most obvious reason to do that is to get a lower rate of interest. Lower interest rates mean lower mortgage payments, which can mean thousands of dollars being saved over the lifetime of your home loan.
A number of lenders offer great introductory rates when you take out a loan with them. However, unlike with other industries, you’re not rewarded by sticking with one lender for the long term. In some cases, it’s the opposite. Those who have not reviewed (or refinanced) their loans can get stuck with far worse deals than necessary.
We must remember that banks and lenders are businesses and sometimes it’s far more valuable to attract new clients than worry about the ones’ you’ve already got. This is where a good mortgage broker can really help you with sifting through the fine print on suitable loans.
Better Loan Products
Back in our parents’ day, it was really just a matter of taking out a principal and interest loan and paying it off over the next 30 years. Fortunately, things have changed for the better and now lenders have a host of great products that can really save you money on your home loan.
A great example would be a 100% offset account attached to your mortgage. An offset account is a transaction account meaning you can use it for everyday things. However, because it is linked to your mortgage it attracts the same higher rate of interest as your mortgage.
More accurately, it saves you interest, in that you effectively only pay interest on the difference between your outstanding loan and your offset account balance.
An offset account can really supercharge your progress if you park your spare money in there and use smart money management techniques.
Access to Cash
If we’ve learnt anything during the COVID crisis, it’s that having some money tucked away for a rainy day is important.
Fortunately, if you’re a homeowner who has owned their property for any length of time you might very well have built up some equity in your property. That’s certainly the case for owner-occupiers and investors in large parts of the east coast, particularly in Sydney and Melbourne who have seen median homes values rise dramatically in the last decade.
By refinancing, it’s possible to access that equity and draw it out as cash. That money can then be used to buy another property as an investment, or as required.
It’s quite possible to access equity and leave it in an offset account. That way it’s not costing you anything but it’s there if you need it. Again, speaking to a mortgage broker will be the best way for you to find out what you can do, given your individual circumstances.
Consolidate Debt
Not all debt is good debt. When you buy a house to live in or as an investment, that’s an example of good debt.
The asset you’re purchasing has a high likelihood of appreciating in value over a long period of time, which will leave you well placed.
Using credit or a loan to buy things that do not appreciate, like a new car or online shopping, will get you into ‘bad debt’. These things will not only depreciate in value almost instantly, but the debt comes with a high rate of interest.
High-interest debt not only weighs heavily on your borrowing capacity, but it is expensive to pay back. An option when you refinance is to roll some of these debts into your home loan and capitalise on the lower rates of interest.
This is a great time to be borrowing money and it hasn’t been this good since the 1950s. With the economy facing a short-term downturn, it’s more important than ever to have access to cash for a rainy day. There’s plenty of additional benefits to refinancing and a mortgage broker will be able to get you on the right track.

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Typically, the holiday period is a time of year where people spend the majority of their money and increase their debts.
 
Come the start of the new year, many people can find themselves struggling with that additional debt burden and often turn to short-term, payday loans to try and help them get by.

What is a payday loan? 
A payday loan is a short-term loan for small sums of money that, more often than not, need to be paid back quickly.
 
Frequently, payday loans are up to $2,000 which are then to be paid back by your next payday, hence the name. There are also payday lenders that let you borrow up to $5,000, with longer loan terms.
 
These loans are usually backed by the fact that you have some form of income and can pay them back within weeks.
 
When a loan application is approved with a payday lender, you will generally receive the funds within a few hours.
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Costs of Payday Loans 
Payday loans often come with some of the highest costs of any loan type, which is due to a number of factors.
 
Firstly, the amounts are small and are repaid quickly - payday lenders are not able to charge interest on small loan amounts.
 
Secondly, those applying for payday loans generally have poor credit ratings and are not always able to get finance through traditional means.
 
According to ASIC, payday lenders are limited in what they can charge on loans under $2,000 and come with these terms:
 
-                    a 20% loan establishment fee
-                    a 4% monthly account keeping fee
-                    a 200% fee for defaults
-                    a Government fee
-                    expenses, if the lender needs to take a borrower to court
 
Will a Payday Loan Impact My Credit? 
All lenders will examine your credit score, which is effectively your track record of paying off debts in the past.
 
They will also assess the types of debts you currently carry, as well as how they impact your disposable income.
 
A lender wants to know that you are someone who manages money well and if you’ve been using payday lenders to get through when money gets tight, this might not be something that is looked on favourably by banks.
 
If you are wanting to get a home loan in the future, it is worth creating a budget to ensure you don’t need to use payday lenders to pay bills for a number of months before applying for a loan or even seeking pre-approval.
 
If you’re struggling with debts, talk to a mortgage broker and find out how consolidating your debts might be another way to better manage your current debts, rather than take on more.

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​In the current low interest rate environment, there are a lot of attractive offers for car finance, particularly coming from dealers.
 
In some cases, you can even find dealers offering 0% finance. While that might look good on the surface, it’s important to understand that the low interest rate might very well come with some additional costs that you hadn’t anticipated.
 
Here are a few things you need to consider before taking on such a low interest rate.
 
The Car’s Price
If you’re getting a deal with 0% interest, it’s possible that you will have to pay more for the car itself. It’s highly unlikely that you’re going to be able to negotiate on the price of the car, and you could even pay far more than you need to.
 
Trade-In Value of Your Old Car
If you are looking to trade in your old car, you might not get the best possible price from a dealer if you require a lower interest rate on your car loan. There’s generally a spread that a dealer must make on the purchase of a second-hand car, and that could mean you get a lower price and/or you pay more for your new car.
 
Higher Deposit
In many instances, it’s possible to get a car loan and pay little or no deposit. This is unlikely if you are getting a very low interest rate as there is some risk to the lender and dealer. Finance is a trade-off at times, and you will need to provide something more if you need a lower interest rate.
 
Shorter Loan Terms
Generally speaking, low interest rates or even introductory offers are only for short set periods of time. While it might be possible to get a standard car loan over seven years, if you’re getting a low interest rate, it might be for only two or three years. If you have a shorter term, then a low interest rate might not make that much sense, because your overall payments will be higher.
 
Fees
Sometimes, these type of interest-rate offers come with other fees and charges that soon add up. It’s important to look at the total cost of the car, the finance and the repayments over the lifetime of the loan; not just how much your interest rate is in comparison to others as it does not always tell the full story.
 
Lack of Choice
In most instances, low interest rate offers are limited to select vehicles within the dealership. While this might not be an issue, if you are in the market specifically for a certain type of car, you might not find what you want.
 
It is far better to have a finance broker look at your personal situation and find a loan that suits you, rather than focusing on getting the lowest interest rate. Often, the interest rate itself is the least important part of getting finance, even though it is the most talked about.
 
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​Those individuals that work for themselves or run a business can, at times, find it a little trickier to get different types of loans. Lenders like to see regular income and ongoing work to give them some degree of comfort that a borrower will be able to repay the loan.
 
A self-employed borrower will have an income, however, it’s likely not going to be as regular as someone who is paid a salary. With that in mind, there are still options that self-employed borrowers can look at, to get a car loan.
 
Lo-Doc Loan
A lo-doc loan is effectively a loan given to a borrower that doesn’t have as much income documentation as a regular wage earner would. When assessing an application for a lo-doc loan, a lender will want to see other forms of income verification such as an accountant’s letter, BAS statements or tax returns.
 
Given there is less evidence to suggest a borrower can make their repayments, the interest rate can be higher than a different type of loan product. It might be possible to offset this higher rate by putting up a larger deposit, or by securing the loan with the car.
 
A secured car loan means the car is put up as security which gives the lender an additional degree of comfort as their risk is reduced. If a borrower can’t make the repayments, they are able to sell the car to recoup any costs.
 
If you’re trying to get a lo-doc loan, it’s important that you have a good credit score, which means ensuring you’ve been paying off all your debts and bills on time in the past. A good credit score means you’re someone who can manage debts well and this should give the lender confidence that you will do the same now.
 
A Chattel Mortgage
If the car you’re looking to purchase is for business purposes, then one option you could look at is a chattel mortgage.
 
A chattel mortgage is a type of car financing for business owners. If you use a car for work more than 50% of the time in the day-to-day operations of running your business, you might be able to qualify for this type of finance.
 
The benefit of using a car for work is the ability to deduct some expenses from your taxes. However, it’s important to seek the advice of a qualified accountant prior to taking out this type of loan.
 
Business owners might not be protected by the National Consumer Credit Protection Act (NCCP), which could be an issue for some purchasers.

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