Market-leading online lender loans.com.au has launched an Australian-first home loan that rewards home owners with a Visa Debit Card attached to an interest-free $5000 credit facility, allowing them to cut up their credit cards.
The “Zip Home Loan” is a radical departure from previous products because its attached “Zip Card” can be used in place of a credit card but without the high credit card interest rates and fees and without needing to be paid off each month.
Managing Director Marie Mortimer said that it was about time that home owners were able to use their assets to avoid high credit card charges.
“I have always thought that people who have saved hard for a home deposit and are willing to secure their debts against their home deserve a lower interest rate than those who are taking out an unsecured loan,” Ms Mortimer said.
“Until now, they never had the choice and you had the situation where the same borrower with the same institution paid 4 per cent on their home loan and then had to pay 18-20 per cent on unsecured debt for the convenience of a credit card.”
Ms Mortimer said that even though the Visa Debit Card was not a credit card, by attaching it to a secured line of credit, loans.com.au had made it fulfill the same function, making it a “credit card killer”.
Loans.com.au’s Zip Card is permanently interest-free, is capped, has no fees, and is only available to borrowers who also have a home loan with loans.com.au.
Ms Mortimer said the Zip Home Loan, which came with a low home loan interest rate of 3.68% (3.70% comparison), could allow the borrower to save a remarkably large amount of money if they used it to its full potential.
For instance, a borrower with a credit card charging 20% interest, who instead used the $5000 interest-free credit on their Zip Card, could save $1000 per year or $83.33 per month. Over a typical 30-year mortgage this would amount to more than $30,000.
“We knew there had to be a better way to deliver the convenience of credit and, when we put our heads together, this is what we came up with. We think this is the way of the future and we challenge the banks to follow us,” Ms Mortimer said.
Ms Mortimer said the Zip Home Loan was great value as a home loan in its own right but was unbeatable when you added the Zip Card feature.
“The average credit card debt is about $3200 – less than our $5000 limit - and most people have only one card, so the Zip Home Loan with Zip Card really does enable them to say goodbye to credit cards for ever while getting the same key benefits,” Ms Mortimer said.
According to ASIC, Australians paid about $1.5 billion in fees on credit cards in 2016–17 over and above interest payments. This sum included annual fees, late payment fees and other charges.
By comparison, the Zip Card carries no fees of any kind and the Zip Home Loan also has no ongoing fees.
If the borrower reaches the credit limit on their Zip Card, the credit simply stops, but no fees are incurred.
Ms Mortimer said that although many people got credit cards intending to pay them off in full each month, ASIC research showed that more than two thirds of outstanding balances were in fact incurring interest payments as well as fees and charges.
Loans.com.au is Australia’s leading online lender and is backed by parent company Firstmac, Australia’s largest non-bank lender. Founded in 2011, loans.com.au has grown a reputation for challenging the home loan industry and now has more than $5 billion in loans under management, with customers in every state and territory.
Media Contact: Duncan Macfarlane on 0434 184 264