The RBA rate rise decision at the Board’s May meeting reflects the improving economic conditions in Australia and the RBA’s move to curb rising inflation. As stated in the statement issued to announce the rate rise, the move to increase the cash rate by 0.25% to 0.35% is the start of the RBA’s actions to normalise the monetary conditions. The record low rates brought into place during 2020 were extraordinary and implemented as part of stimulus measures during the pandemic.
For those with current loans and finance and with pre-approved loans yet to be used questions may be raised around what the RBA rate rise means for their loans. To address those concerns and clear doubts for those considering applying for new finance and loans, we have prepared this overview of outcomes for different types of loans caused by RBA moves on the cash rate.
Variations for Fixed and Variable Rate Loans
The majority of loans and finance arranged through Jade Finance will be secured with a fixed interest rate. In these categories, fixed means fixed and unchanged for the entire loan term, regardless of any changes in the interest rate market.
Some other lenders and for some of our loans such as Unsecured Personal and Business Loans, a variable interest rate may apply in some instances. Variable rates can be changed by the lender in response to changes in the cash rate by the RBA.
Those with variable rate loans may wish to contact their lender to discuss their individual situation.
Those planning to apply for new loans and finance can avoid facing interest rate and repayment rises in the future by ensuring they secure a fixed interest rate loan.
Effect on Current Loans and Finance
Where loans are currently in place with a fixed interest rate, the rise in the cash rate will have no effect on the loan rate or the repayments. This would apply to the majority of secured loans we offer including Secured Car Loan, Secured Boat Loan, Secured Caravan Finance, Secured Motorcycle Loan and the range of business equipment, truck and vehicle finance – Chattel Mortgage, Commercial Hire Purchase and Lease.
The fixed interest rate as established when the loan was finalised will remain in place. This ensures the repayments also remain the same
Outcomes for Pre-approved Loans
Especially in our motor vehicle sector, many customers have been seeking pre-approved car loans so they are ready to pounce on stock as vehicles become available. Pre-approved loans are offered with a time validity. The loan must be used, as in taken up with the purchase of the goods, within that time period or the loan offer expires.
Existing unexpired pre-approved loans should be available at the rate included. If the pre-approved loan expires before use, a new quote would need to be acquired if the loan is required to be renewed. The re-quoted loan would be priced at the cheapest interest rates we can source at the time.
Quotes for New Finance Applications
Applications for new personal loans and business finance are quoted based on the interest rates which apply at the time of application. Applications made after a rate increase will reflect the lender decisions around such a rise.
Our consultants will always strive to achieve the cheapest rate for all loans. As we are in a great position to cover a vast section of the lending market, we can achieve better interest rates across our loan products for many of our customers.
Interest rates do vary across loans for different goods and with different business finance products. Those differentials or variations remain and unchanged by any general rate rise.
Check Your Credit Profile
Now that the RBA has moved and the lending sector enters this era of rate rises, it is more important than ever to maintain a good credit profile. The credit profile or rating forms an integral part of the assessment of a loan application by banks and lenders.
Applicants with a high credit score are generally offered the best interest rates. Low scores are seen as higher risk applicants and the higher risk means higher interest rates. Other aspects of the application may also impact the interest rate offered.
A good or better credit rating can be achieved by paying bills on time, limiting applications for new loans and credit, holding lower credit card balances and generally have a better asset to liabilities ratio. That means, reduce what you owe.
Addressing these matters prior to applying for new loans may improve the prospects of achieving a better interest rate and cheaper loan offer.
Optimise Our Services
RBA rate rises will have an effect across the lending markets but cheap interest rate loans can still be attained. Applicants may improve their prospects of securing the cheapest rate loans by using Jade Finance to source and secure the loans. Our services are available to both individuals and to businesses and present an extremely viable, sensible and time-saving alternative to sourcing loans directly. Our bargaining power and connections with lenders are just some of the features that contribute to delivering better loan outcomes for our customers.
Contact Jade Finance 1300 000 008 for loan and finance quotes
DISCLAIMER: NO LIABILITY IS ACCEPTED IF ERRORS OR MISREPRESENTATIONS ARE FOUND IN THIS ARTICLE. THE ARTICLE IS PREPARED AND PRESENTED FOR GENERAL INFORMATIVE PURPOSES AND IS NOT INTENDED TO BE THE SOLE SOURCE OF INFORMATION FOR MAKING FINANCIAL DECISIONS. THOSE REQUIRING GUIDANCE AND ADVICE SHOULD CONSULT A FINANCIAL ADVISOR.