Every lender has their own terms and conditions, and this is intended only as a general guide to understanding this topic. Contact us to discuss your individual circumstances.
A redraw loan enables you to make extra regular or one-off payments above your minimum monthly repayment. The redraw facility allows you to access those extra payments when you need them.
- You can commit to regular extra payments to reduce the interest charged on your loan, decreasing both the total amount of interest you pay and the term of the loan.
- There is access to your funds in emergency or when they are most needed.
- You can put your holiday, car or other savings in the redraw account – separating them from your day-to-day money.
- It can be more effective than a savings account because you don’t have to pay tax on the interest you don’t pay.
|For $10,000 savings:||Bank Account||Home Loan|
|Interest received (saved) pa||$500||$700|
|You get (save)||$343||$700|
- There may be a minimum redraw amount, in some loans it is thousands of dollars.
- There may be a fee to redraw your money, although some lenders offer free redraw.
Things to consider
- How do you access your money? It may be instantly available, through ATM, EFTPOS etc or it may be available after a processing time – through internet or telephone banking. If you go into a bank branch to redraw, you will often be charged a fee.
- Is there a maximum redraw amount?
- How many free redraws are offered per year? What are the fees once you exceed your quota?
- Is there a maximum number of redraws allowed per year? Some lenders offer unlimited redraws, other products allow a set amount.
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