Best used where the loan is only expected to be required for the short term. However, they normally have early repayment fees so be careful. There are a small number of lenders without these fees and these products are good for short term finance (say less than 2 years. These products are generally not very good for long term loans  because after the honeymoon period the interest rate reverts to the standard variable rate.

This is a no frills product that is offered by most lenders. Normally, there aren’t many other features to speak of. Most basic variable loans offer redraw but at a higher cost. Again, many of these products have a break costs. The interest rate for these products is generally in the range of 0.50 per cent to 0.60 per cent below the standard variable rate. These loan products are best used to finance investment property loans. They suit “set and forget” style arrangements. That is, most investors set up an interest only loan and arrange for the interest only repayments to b automatically debited from their transaction account. They hardly touch the loan account or need any other features; these products are perfect for small home loans.

Offset accounts are normal loan account linked to a transaction account. Interest is calculated on the net balance between the loan account and the transaction account. That is, the transaction account balance is offset against the loan balance. Fox example, if your loan balance was $100,000 and your transaction account balance is $10,000, then you would be charged loan interest on a net balance of $90,000. These products are best used for owner-occupier (or home loan) debt. The reason for this is that you are better off to offset non-deductible debt with any free cash rather than deductible debt.   The only time I would recommend using an offset account is within a professional package.

This is a pretty simple product. The interest is fixed for a specific period of time. In Australia you have the option to choose between a fixed rate period from one to five years, seven years, ten years and even 15 years. Normally fixed rate loans limit the amount of extra repayments you can make (normally limited to approximately $10,000 per year). These products suit borrowers that are concerned with interest rate increases. History tells us the fixed rate borrowers are not likely to be better off. Therefore, realize that you will probably pay a premium for this interest rate protection. A split loan (fixed and variable) can give you the best of both worlds.