Redraw

Redraw is where you can make extra payments overtime but then access the funds by taking back out again if needed. The money in your redraw account may reduce over the life of your loan so that, by the end of your agreed loan term, both your loan balance and the available redraw will be zero.

Making extra repayments can be a simple way to pay off your loan faster as the principal balance decreases more rapidly and reduces the interest you pay, but having access to a redraw facility may provide that extra sense of freedom should you need that money down the track. Although you must consider that there are often limits on the amount of extra repayments borrowers can make (e.g. $20,000 annually), as well as minimum or maximum amounts you’ll actually be able to redraw. Make sure you’re aware if your loan allows for redraw or not and what the redraw fees are, if any.