Variable rate loans are loans where the interest rate remains variable (usually a set margin below the banks standard variable rate).Variable loans are great for people who need flexibility. All the variable rates used to move in line with changes in the reserve bank of Australia’s cash rate. They no longer do and also don’t move in line with other banks, consequently loans that might be a great variable rate when you take them out might no be so great a year later. This is why we automatically review all our loans annually to ensure competitive ongoing pricing.

Variable rate loans also are often coupled with other loan features such as an offset account.

How Does An Offset Account Work?

An offset account works along side a normal variable loan account. Where if you have $100 in a variable account and pay an interest rate of 5%, you get charged 0.5×100= $5 a year in interest. If you have $80 in your variable rate acount and $20 in an offset account, then you would only pay .05×80=$4 interest a year.

So the more money you have in an offset account the less you would pay in interest.

What Are The Exit Fees For A Variable Rate Loan?

Its case by case basis for each lender but since the government has bought in new legislation, to get out of most variable rate loans now is less than one thousand dollars, and sometimes a lot less.