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Discounted rate of 10.49%... really?

Discussion in 'Property Finance' started by wylie, 1st Dec, 2015.

  1. wylie

    wylie Moderator Staff Member

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    Hubby received today in the mail from Westpac an offer to apply online for a Flexi Loan of up to $60k at a "discounted" variable rate of 10.49% plus a $0 establishment fee.

    In whose universe is 10.49% a "discounted" rate?

    Initially, had it been at a better rate, I would have jumped at it just to tidy up a few things, but that is more like "extortion" rate.
     
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  2. Bran

    Bran Well-Known Member

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    I've got an unsecured LOC at 11.39% which is a pretty good rate, so 10.49% sounds like a good discount if its unsecured.

    I had 100K in it at the February mark - that hurt on a weekly basis until I was able to refinance

    How much are you borrowing? I can give you another 1% off if you like ;)
     
    wylie likes this.
  3. Redom

    Redom Mortgage Broker Business Member

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    Haha fair question - its likely unsecured lending so that makes its competitors other personal loans. Banks work by saying everything is discounted, it helps 'sell' to consumers. I.e. with the majors you may get a 1.3% discount of the SVR - and end up paying more than someone with no discount from an alternative lender. Also the same reason why supermarkets put those yellow stickers on tim tams, etc (it works on me, or maybe i'm subconsciously looking for reasons to justify the the tim tams!).
     
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  4. D.T.

    D.T. Adelaide Property Manager Business Member

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    I had one of these, it was at 13.69% so I'd be happy with 10.49 :)
     
  5. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    10.49% is really good for unsecured lending - I probably wouldn't use it to buy a house though :)
     
  6. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    Exactly - for an unsecured debt that's fairly competitive, only marginally more expensive than second tier secured debts (car loans, business etc)
     
  7. sanj

    sanj Well-Known Member

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    It's a good rate, I regularly and happily pay similar or higher for unsecured loans.
     
  8. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    I've got one of those loans. As discussed above it's a unsecured personal loan rate not a mortgage rate. It helped pay deposit on an IP.
     
  9. cheekykoon

    cheekykoon Well-Known Member

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    How does unsecured lending hurt the credit score?
     
  10. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    usually used for doo dad debt, not ideal for long term hard debt

    Very often there is no corresponding asset ..............

    ta
    rolf
     
  11. Scott No Mates

    Scott No Mates Well-Known Member

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    But it is half the cost of most credit cards and gives you the opportunity to consolidate alot of these smaller debts which are at exorbitant rates.
     
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  12. Pins

    Pins Well-Known Member

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    My broker pointed me in the direction of a Citibank personal loan - 5.99% if you pay it off in 2 yrs. pretty good. Haven't really looked into it too much but I think you can only borrow up to 30k or thereabouts?

    K
     
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  13. cheekykoon

    cheekykoon Well-Known Member

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    Rolf, but does it hurt credit score if the payment is prompt and stuffs? I'm thinking to use this to build my position further. Say I have a few of these revolving ones and build them up in a ladder system, suppose you can do it with a few banks and get cheap loans that way and clear them every 6 months and get into a position 6-12 months faster. Only thing is, does it hurt credit score such that getting a loan would be difficult?
     
  14. Redom

    Redom Mortgage Broker Business Member

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    Refinancing personal loans on a 6-12 month basis to extend maturities/interest free periods will definitely hurt credit scoring - the increased activity alone won't help as well as personal debt doing more damage than secured lending. Having a series of them on your file may raise questions from the assessors if it gets that far too (pass credit scoring).
     
  15. wylie

    wylie Moderator Staff Member

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    This forum is fantastic. I've gone from thinking this is extortion to realising it is a tool I can use for the times when I need money fast. We are going to apply for it today after reading these replies. Goes to show you can teach an old dog (me) new tricks after all. I've rung my contact at the branch (who calls regularly but I never need answers when he calls) and found out I can draw it down to establish it (assuming we are approved), pay it down to zero and keep it as an emergency pot of money for ever.

    If I draw it down I will be charged $10 a month account fee, but only for the months that it is actually drawn down.

    Thank you for everyone who commented. I can see now that this is an opportunity we are silly not to take, and cheaper than drawing cash from my card, which I never do (but have had to do some fancy footwork to avoid it at times).
     
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  16. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    It can be a good idea unless it's going to impact your serviceability for other loans.
    As you said there are no charges if you have it at $0 and it can help with SANF especially during a development when some extra charge may spring up at the end/middle and you have a wtf moment.
    When applying for it you have a choice to nominate an amount or let the computer determine an amount for you. The computer generally gives you more. Also there is an option to have insurance on it - say yes even if you don't want it - as the amount the computer will give you is then more. You then have 1-2 weeks cooling off on the insurance to turn it off and it won't affect the amount that the loan was approved for.
    It's not a cheap cheap tool but if used effectively and with regard to your future serviceability it can be used powerfully.
     
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  17. Barny

    Barny Well-Known Member

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    @wylie
    City bank let you borrow upto 60k unsecured. But to get the 5.9% you must not spend more than 48k which is 80%. Anything over the 80% will be charged at just over 19%. Over 2 years, if it goes past 2 years you start paying 19%. Pretty good deal I reckon.
    I believe it's $130 to start up the account. Enquired about it last week.
     
  18. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Having multiples would hurt but if it's like the flexi loan and it's taken down to $0 it still exists and can be reused again and again without a new credit hit.
     
  19. sanj

    sanj Well-Known Member

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    Bloody hell that's a great deal. Might look into it myself. Thanks.