What Does Redraw Mean On A Personal Loan
You really need an offset account in this scenario.
What does redraw mean on a personal loan. Put simply a redraw offset facility is linked to your home loan where you can put money e g. What you will likely end up with is a headache from trying to manage the personal and investment components of the. It allows you to draw back additional payments the amount above your scheduled payments you have made on the loan.
Say you ve been making extra repayments religiously and have accumulated a total of rm10 000 in excess this facility would allow you to take out that rm10 000 as cash for your own use. You can find out more by reading our article on offset accounts. A redraw facility gives access to any extra repayments you may have made on certain types of loans.
The loan jumps to 450 000 but as the redraw is for personal use the loan amount attributable to the investment property remains at 400 000. However some personal loans do have variable interest rates that change periodically. Accessing redraw may be different for each product.
If your only concern is to pull out extra repayments in an emergency then redraw is probably fine. From savings or your pay and rather than earn credit interest on that money use the money to reduce the interest payable on your home loan. You may also need to have reached a certain amount in additional repayments in order to redraw the funds.
Redraw is a more common feature than an offset account. The drawback of a variable interest rate is that your payments can fluctuate as your rate changes making it harder to budget for your loan payments. Redraws on personal loans typically have certain conditions around them.
A redraw facility may not be as flexible as an offset account. By contrast a redraw facility is not a separate account but a feature attached to your loan. So it doesn t give you the flexibility to access money in the same way that an offset account can.
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