Loan Tip: Offset More than the Loan – What Happens?

There is little point in having more money in an offset account than the balance of the loan outstanding.

Example

$200,000 loan with an offset account.

Savings builds up and the offset now has $201,000



Any amount over the loan amount would not be saving you any interest. In the above example if the offset exceeds $200,000 there would be no interest saved and no interest paid either so you would probably be better off by putting further savings elsewhere such as into an interest bearing savings account – or a separate offset account on another loan if you have one, even an investment one.

Note that these days you might be unlikely to get much interest in savings accounts. So if you have an offset account full you should perhaps ask yourself if you are making best use of that money.