We make the best decisions with the information we have available
And as a result many of us look for “basic” loans. These are…
> Low fees – perhaps NO fees even
> Low rates (may be) OR bait and switch LATER after you are with them
That’s how it goes. People get sold the idea, but not informed of the risks.
There is no offset. However there is ‘redraw’ account on these loans.
Difference?
Redraw account on BASIC loans…
> sure works if the cash flow available is just enough to make repayments
However the biggest risk is when you have say $25k, $50k or $100k or even more in the re-draw…
The lenders can adjust the loan balance by freezing the funds and paying down the loan balance.
There by you losing your ’emergency’ / ‘buffer’ funds without any consultation from you
The offset account on the other hand give you control of your money and is backed by $250,000 government guarantee .
There are further tax benefits in the future which are set to save one 1000’s over the years when the time comes (as long as you have the right advice).
Yes you need to pay an annual package fee for this…
However, think about this… Let’s say you have $50k in cash savings. Consider two options:
1. Paying say a $250 to $400 annual package fee to keep control of your $50k + future tax benefits when you come to investing
2. Paying $0 for the loan and the lender at their will taking your $50k and paying down the loan balance
What do you prefer?
If you have this sort of a structure, suggest you re-structure asap before letting the bank drive this on your behalf (and in fact without your approvals – they don’t need your approval to reduce the loan using the redraw money FYI)
Also consider this if you are with non bank / third tier lenders.
Lenders are right now reviewing their policies with their risk teams and we will soon be hearing more of this as people claim hardship and the banks try to balance their books with minimising risk where they can and bringing down the overall exposure.
Watch this space.
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