Cheapest Loan May Not Be The Best
Illawarra Mercury
Wednesday November 7, 2001
People looking to borrow money shouldn't necessarily opt for low cost or cheap loans.
That's the opinion of The Mortgage Bureau's John Mulcair, who said nevertheless it was everybody's right to find the right products at the lowest possible price.
However, he said sometimes consumers were lured into a false sense of security, believing they were getting a good deal.
Mr Mulcair said in the past it may have been possible to organise a cheaper alternative to a bank loan but these days providers had to match the competition to remain in the market.
``As far as cheap loans are concerned, people need to remember that there is no such thing as a free lunch," he said.
``What makes the difference between a good loan and a bad loan is not the price but the flexibility of the product when applied to the borrowers' needs.
``Borrowers should clearly consider what they want from a mortgage product before signing up."
Mr Mulcair added that if there were features and benefits in the product that borrowers would never use they should not opt to take it as they would probably pay a higher interest rate and higher fees and charges for services they would never use.
Borrowers also needed to be wary of introductory or honeymoon rates.
``While there may be an advantage for the first year, the rates for the balance of the term are usually at the premium interest rate with penalties in some cases if they decide to refinance or restructure within the first three to five years."
Mr Mulcair added that being bombarded with a myriad of home loan options was the biggest difficulty borrowers faced.
``The Mortgage Bureau can assist in this process at no cost by reviewing all loan options available, including terms and conditions, features and benefits as well as fees and charges which meet their particular needs."
© 2001 Illawarra Mercury