Key takeaways
- Offset reduces interest by linking savings to your loan balance.
- Redraw lets you withdraw extra repayments you have made.
- Offset is more flexible for everyday banking.
Offset accounts and redraw facilities both help you pay less interest — but they work differently. Choosing the right structure can save thousands over the life of your loan.
On this page
Offset accounts
A transaction account linked to your loan. Your savings balance offsets the loan principal for interest calculation — you pay interest on loan minus offset balance. Fully accessible like a normal bank account.
Redraw facilities
Extra repayments above the minimum are available to withdraw later. May have minimum redraw amounts or fees. Not always instant access.
Offset vs redraw
Offset suits everyday savings you want instant access to. Redraw suits lump-sum extra repayments you may not need immediately. Some loans offer both.
- Offset: better for ongoing savings balance
- Redraw: better for irregular lump sums
- 100% offset accounts maximise benefit
- Check annual fees on offset packages
General information only — not personal financial advice. Consider your own circumstances and read the Product Disclosure Statement (PDS) before purchasing any policy. Moneyhero may earn referral fees from some providers when you switch through us; this does not change how results are ordered. How we compare
Frequently asked questions
Quick answers for common questions about this topic.
Do offset and redraw reduce interest in the same way?
Both can reduce interest by lowering the effective balance used for calculations, but offset does this via a separate linked account while redraw relies on extra repayments already made to the loan.
Can lenders change redraw access rules?
Yes. Redraw terms are set by the lender and can include limits or notice requirements, so review the contract and product updates carefully.
Is an offset account always worth the annual fee?
Not always. It depends on how much balance you keep in offset and for how long. Compare expected interest savings against package and account fees.
Can I have both offset and redraw on one loan?
Many lenders offer both features on suitable products or split structures, but inclusions differ, so compare product details rather than assuming both are available.