Really, access loans and traditional home loans are very similar. The big difference is that access accounts have a savings account component. The balance of that savings account reflects the equity you have in your home. Basically, all that means is the more your home is worth, the more money you will have in your access savings account. It's important to understand though, that if you take the money out of this savings account, you are actually taking it out as a loan against the equity in your home.
In many respects, this offers consumers a unique type of money management opportunity. If you pay money into your home loan, on top of your normal installment, it not only allows you to pay off the home more quickly, but it also establishes a surplus that can be used for short-term loans. However, don't forget that these funds must be paid back. You will pay them back at the same interest rate you have on your home loan. Really, the key thing to keep in mind is to only borrow what you can pay off in a comparatively short amount of time.
Access bonds offer the advantage of being able to access the equity in your home. It can be done at any time, and the money is yours to use however you see fit. These monies can be used for short-term debt, a holiday, home improvements, or even a new automobile. In fact, many people do use these funds for car loans. The reason is that car loans usually have a higher interest rate than home loans. The home loan will come in lower than the prime lending rate, but a car loan would be higher. Thus, you can save money.
Student loans is something else people generally use these monies for. Once again, the home loan interest rate will be lower than the prime lending rate. Student loans are also set up so they milk out a larger interest charge. You cannot pay anything but interest until the student graduates. That can add up,. So, if you use these access bond account funds for a student loan, you can save a good deal of money over the long run.
Just like with any loan, access bonds have advantages and disadvantages. They do have a lower interest rate, but access bonds also have a shorter payback term. If you fail to meet that payback term, you could end up paying far more in interest than you would have paid with a conventional bond. Also, you need to keep in mind you are borrowing against your home. Because of that, if you don't repay the loan the bank can repossess your property.
Graham McKenzie is the webmaster for a leading South African bond originator. For more information visit: http://www.bondcredit.co.za/
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