**REDRAW VS OFFSET**

Do you know the difference between redraw and offset accounts? Understanding the differences is very important particularly during these uncertain times.

A redraw facility is where you can make additional loan repayments to reduce the balance of your loan and in theory, withdraw the funds back if required. This is a great way to save on paying interest. However, redraw of these additional repayments are usually at the lenders discretion. A lender may refuse a redraw request at any time. During the GFC, many lenders cleared out customers redraws accounts leaving many with no savings. It’s important to be mindful of where savings are held and what access you may have to these during an economic crisis.

Offset accounts on the other hand are savings accounts which reduce the interest payable on the loan amount by the balance of the savings account. An offset account is a separate deposit account, whereas a redraw facility is not a separate account, but a feature attached to the loan. A lender cannot refuse a customer having access to their own savings (except in the event of a loan default). If you have any questions, please contact me on 0411 212 930 or laura@alarahomeloans.com