Did you know that your everyday savings account could not only save you interest on your home or investment loan but also reduce the length of your loan term? Yes, we’re serious – it’s known as a 100 percent offset account.

An offset account links your everyday savings account to your loan and uses your account balance to offset your loan balance daily. That is, instead of being charged interest on your entire loan amount, you will be charged interest on your loan amount minus the amount in your linked offset account, allowing you to utlise your income and additional savings to reduce the interest owed on your loan.

For example:
If you have a $300,000 loan and $20,000 in your offset account, you will only be charged interest on $280,000. For a 30-year loan with a 5.00 % interest rate, the $20,000 in your offset account will save you $34,169.00 over the life of your loan and reduce your loan term by 3 years and 1 month.

So what’s the catch? There is none! While the feature is, in most cases, only available for those who have a variable-rate loan, an offset account generally doesn’t incur any extra fees*. Furthermore, any money in your offset account will be available just like a savings transaction account, so you shouldn’t be disadvantaged withdrawing or spending your money.

TIPS TO MAXIMISE YOUR SAVINGS
As you generally won’t be charged any fees for the account*, even a low account balance will save you money over the long term. That said, there are two popular ways you can maximise your savings without changing your spending habits.

Make The Most Of Your Income
As the interest payable on your home or investment loan is calculated every day and charged to you once a month, it’s important to utilise all your money throughout the month. Therefore, if you request your income to be paid into your offset account, you could still access and spend your money like usual, but you will be offsetting your income until it has been spent, which will be especially beneficial at the start of your pay cycle.

Take Advantage Of Your Credit Card’s Interest-Free Period
Instead of using your savings to pay for your everyday purchases, you may choose to use your credit card to maximise the amount of money in your offset account at any given time. Then, at the end of each month, you could pay off your credit card with your savings before any interest has been charged to your credit card.

If you’re interested in learning more about how an offset account may help you to save money and reduce your loan term, please don’t hesitate to contact one of our experienced credit advisers on 1300 PODIUM or info@podiumfinancial.com.au.

*Subject to each lender and loan product. Package fees may apply.

 

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