With most loans, making additional repayments can help you reduce the amount of interest you have to pay and ultimately help you pay it off sooner. But circumstances can sometimes change while you’re paying back your loan, and at some point you may find you need some extra funds.
If this is the case, redrawing from your personal loan may be a suitable option.
What are the advantages of redraw?
The main advantage of a redraw facility is that you’re able to pay down your personal loan reducing the amount of interest you have to pay, while still having access to any additional repayments should you need them. For weekly and fortnightly direct debit payers, only payments over and above the minimum required repayments will be available for redraw.
What do you need to consider?
Redraws on personal loans typically have certain conditions around them. For starters, the loan needs to offer the facility as a feature – these are usually personal loans with a variable rather than fixed interest rate.
You may also need to have reached a certain amount in additional repayments in order to redraw the funds.
Keep in mind, too, that fees may apply to redraw the money – check for these with your loan provider. At CommBank, redraw is available for free via NetBank, CommBank App, phone or in branch.
What are your other options?
If you need to redraw more funds than what’s available, you may want to consider refinancing your personal loan instead.