The Different Types of Loans Available in 2025

Choosing the right loan can have a big impact on your financial future. Whether you're buying your first home, upgrading, investing or covering personal expenses, understanding your options is key to making the best decision for your goals and budget.

In this guide, we’ll break down the different types of loans available in Australia, so you can move forward with clarity and confidence. Let’s get started.

1. Home Loans

Buying a property? A home loan (also known as a mortgage) is typically the biggest loan most Australians will ever take out. Home loans come in several forms:

Variable Rate Home Loan

A variable rate home loan means your interest rate can go up or down depending on market conditions.

• Pros: Flexibility, extra repayment options and often features like redraw facilities.

• Cons: Your repayments could increase if interest rates rise.

Fixed Rate Home Loan

A fixed-rate loan locks in your interest rate for a set period (usually between 1 to 5 years).

• Pros: Certainty over repayments and protection against interest rate rises.

• Cons: Less flexibility — fees may apply for extra repayments or breaking the loan early.

Split Loan

A split loan offers the best of both worlds, allowing you to split your mortgage into both fixed and variable portions. This can provide security on the part of the loan while maintaining some flexibility.

Interest-Only Loan

With an interest-only loan, you pay only the interest for a set period (usually up to five years), then start paying both principal and interest. This is commonly used by property investors aiming to maximise cash flow in the short term.

2. Personal Loans

A personal loan is a versatile borrowing option, often used for things like home renovations, weddings, holidays or consolidating debt.

Secured Personal Loan

Backed by an asset (such as a car), secured loans typically offer lower interest rates.

Tip: Make sure you understand the risks — if you default, the lender can repossess the asset.

Unsecured Personal Loan

No collateral required, but interest rates are usually higher to compensate for the lender's increased risk.

3. Car Loans

If you’re buying a new or used vehicle, a car loan could be the right choice. Car loans are often secured against the car you're purchasing and may have lower rates compared to unsecured personal loans.

Important to know: Some lenders offer pre-approval, giving you more negotiating power when you visit dealerships.

4. Investment Loans

An investment loan is designed for purchasing investment properties or shares. They can be structured similarly to home loans but may come with different lending criteria and interest rates.

Key types:

• Principal and Interest Loans: Repaying both the loan amount and interest.

• Interest-Only Loans: Ideal for investors wanting to maximise short-term cash flow and tax benefits.

Many investors also use strategies like negative gearing to offset property losses against their taxable income.

5. Construction Loans

Building your dream home? A construction loan is tailored for people building a property rather than buying an existing one. Instead of receiving the full loan amount upfront, the funds are released in stages (drawdowns) as the build progresses.

Benefit: You only pay interest on the amount drawn, not the full loan amount from day one.

6. Business Loans

If you’re looking to start, expand or manage cash flow for a business, a business loan could help.

Common types include:

• Term Loans: Lump sum funding with regular repayments.

• Lines of Credit: Flexible access to funds as needed.

• Invoice Financing: Borrowing against unpaid invoices.

Lenders typically look at the business's revenue, profitability and creditworthiness before approval.

7. Development Finance

Planning a residential, commercial or mixed-use development? Development finance is a specialised type of loan used to fund the acquisition and construction of property developments. It’s typically used by builders, developers or investors working on projects, such as townhouses, apartment blocks or land subdivisions.

How it works: Funds are usually released in stages, based on the progress of the development and property valuation milestones.

Tip: It's important to work with a lender or broker who understands the complexities of development projects to structure the loan effectively and manage risk.

Choosing the Right Loan for You

When considering any type of loan, it’s important to factor in:

• Interest rates and comparison rates

• Fees and charges

• Flexibility and features

• Your current and future financial situation

Talking to a professional mortgage broker or financial adviser like our team here at Richmond Residential can help you assess your options, compare products and secure the loan that's best suited to your needs.

Final Thoughts

Understanding the different types of loans available can empower you to make confident, informed financial decisions. At Richmond Residential, we’re committed to helping you navigate the lending process with expert advice and personalised service.

Ready to take the next step? Contact us today to explore your options and start your journey towards financial success!