Fixed or variable home loan

Should I apply for a fixed or variable interest rate home loan?

Rates and fees last updated on

Find out which interest rate type suits you so you save the most.

Choosing between a fixed or variable rate home loan boils down to your financial situation and how likely your life or financial situation will change. If you're not sure what types of changes in your life or home are around the corner, a variable rate home loan is usually a good idea simply because they are more flexible and have lower fees.

If you need to refinance or repay your loan too while on a fixed rate loan, you are liable for an early repayment cost, which can add up to tens of thousands of dollars.

More about Fixed or Variable interest rate home loan

Things to think about

Before you make any decision regarding a fixed or variable home loan, always look closely at your current financial situation and your future goals. Be honest about your need for repayment certainty and security and work out whether you're likely to sell your home in the near future. These things will help you make a more informed decision about which option is likely to suit your needs best.

things to think about when it comes to fixed or variable
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Fixed or variable with Carla Baldock | RAMS head of products

Carla discusses some considerations when choosing between Fixed or a Variable rate loan

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Fixed rate home loans

What is a fixed interest rate home loan?

A fixed rate home loan is a mortgage that has an interest that is fixed for a number of years. At the end of the fixed interest period, the loan will either revert to a variable interest rate or the borrower can choose a new fixed interest period. Fixed loan periods are from one to five years.

Rates last updated September 23rd, 2017
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤90% ($150K+ Owner Occupier)
Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.
3.49% 4.47% $0 $375 p.a. 90% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier Special Rate, P&I)
Owner-occupiers can lock in a competitive rate with no ongoing fees. Conditions apply.
3.64% 4.83% $0 $0 p.a. 95% Go to site More info
UBank UHomeLoan - 1 Year Fixed Rate (Owner Occupier)
A one year fixed rate offer with no ongoing bank fees.
3.69% 4.15% $395 $0 p.a. 80% Go to site More info
NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier P&I) First Home Buyer Special
A special rate for first home buyers buying residential property and borrowing over $150K. 350K NAB Rewards Points offer available. Terms and conditions apply.
3.69% 4.86% $0 $395 p.a. 90% Go to site More info
ME Flexible Home Loan Fixed - 2 Year Fixed Rate (Owner Occupier, P&I)
Get a competitive 2-year fixed rate with no application or ongoing fees.
3.74% 4.81% $0 $0 p.a. 95% Go to site More info
SCU My Life Fixed Rate Home Loan Package - 3 Years Fixed Rate
Fix your rate for 3 years and borrow up to 95% LVR.
3.69% 4.00% $0 $350 p.a. 95% Go to site More info
UBank UHomeLoan - 3 Year Fixed Rate (Owner Occupier)
An online home loan offer with a fixed interest offer for 3 years.
3.99% 4.08% $395 $0 p.a. 80% Go to site More info
Easy Street Fixed Home Loan - 2 Years (Owner Occupier, P&I)
Apply for Easy Street fixed rate home loans and get a competitive loan with a fixed interest rate.
3.85% 4.10% $500 $0 p.a. 95% Go to site More info
Virgin Reward Me Fixed Rate Home Loan - 3 Years $300k+ Special offer (Owner Occupier, P&I)
Get a competitive interest rate for 3 years and a discounted variable rate when the fixed period ends.
3.79% 4.00% $0 $10 monthly ($120 p.a.) 90% Go to site More info
Greater Bank Ultimate Home Loan - Discounted 2 Year Fixed LVR ≤90% ($150K+ Owner Occupier)
Discount off an already competitive 2 year fixed rate for loans over $150k. NSW,QLD and ACT residents only.
3.69% 4.45% $0 $375 p.a. 90% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 3 Year Fixed (Owner Occupier Special Rate, P&I)
A limited time fixed rate home loan with extra repayment abilities. Conditions apply.
3.69% 4.73% $0 $0 p.a. 95% Go to site More info
Greater Bank Ultimate Home Loan - Discounted 3 Year Fixed LVR ≤90% ($150K+ Owner Occupier)
Enjoy discounts on banking products and insurance with this package loan. NSW, QLD and ACT residents only.
3.74% 4.42% $0 $375 p.a. 90% Go to site More info
NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier P&I)
A fixed rate package with flexible repayment options. 350K NAB Rewards Points offer available. Terms and conditions apply.
3.88% 4.89% $0 $395 p.a. 95% Go to site More info
4.14% 4.77% $0 $0 p.a. 95% Go to site More info
ME Flexible Home Loan Fixed - 3 Year Fixed Rate (Owner Occupier, P&I)
A competitive 3 year fixed rate with a redraw facility and split loan options, plus no application fee.
3.99% 4.77% $0 $0 p.a. 95% Go to site More info
Tic:Toc Live in Fixed Rate Home Loan - 1 Year (Owner Occupier)
Apply online for this fixed rate, low-fee loan with redraw facilities and an optional offset account.
3.94% 3.71% $0 $0 p.a. 80% Go to site More info
NAB Choice Package Home Loan - 5 Year Fixed (Owner Occupier P&I)
A competitive loan with flexible features. 350K NAB Rewards Points offer available. Terms and conditions apply.
4.59% 5.01% $0 $395 p.a. 95% Go to site More info
Aussie Select Basic Fixed Rate Home Loan - 2 Year Fixed LVR up to 80% (Owner Occupier)
A two year fixed rate home loan with no annual or application fees.
3.99% 3.84% $0 $0 p.a. 80% Enquire now More info
ANZ Breakfree Package Home Loan - 2 Year Fixed (Owner Occupier, P&I)
This 2 year fixed ANZ Breakfree Package rate comes with package discount and product bundle. Terms and conditions, package fee and fees, charges & eligibility criteria apply.
3.88% 4.94% $0 $395 p.a. 95% Enquire now More info
Commonwealth Bank Wealth Package Fixed Home Loan - 2 Year Fixed (Owner Occupier) P&I
A package home loan with fee free extra repayments available during the fixed term.
3.99% 4.99% $0 $395 p.a. 95% Enquire now More info
ANZ Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier, P&I)
Get a 2-year fixed rate with flexible repayment options to help you save.
4.03% 5.04% $600 $10 monthly ($120 p.a.) 95% Enquire now More info
St.George Fixed Rate Advantage Package -  2 Year Fixed Rate (Owner Occupier, P&I)
A discounted package rate for owner occupiers with the ability to package a Qantas rewards earning Amplify credit card. $1,500 cashback available for refinancers. Conditions apply.
3.85% 4.95% $0 $395 p.a. 95% Enquire now More info
Heritage Bank Fixed Rate Home Loan - 2 Year Fixed Rate (Owner Occupier, P&I) New Customers Only
Enjoy a 2-year fixed rate with interest-only options and a partial offset account.
3.99% 5.03% $0 $8 monthly ($96 p.a.) 95% Enquire now More info
Auswide Bank Fixed Home Loan Plus with Freedom Package - 3 Year Fixed $150k to $249k LVR <= 90% (Owner Occupier)
Lock your rate in for 3 years and enjoy a discount on your loan of $150,000 -$249,000.
4.09% 4.98% $0 $395 p.a. 90% Enquire now More info
Westpac Fixed Options Home Loan Premier Advantage Package - 2 Years, P&I
Lock in a discounted fixed rate with a low service fee.
3.99% 4.90% $0 $395 p.a. 95% Enquire now More info

Benefits of fixed rate home loans

  • Fixing: One of the biggest benefits to choosing a fixed rate home loan is the certainty that your rates cannot increase during that fixed term. If it's likely the variable rates are going to increase, this lets you avoid being stung by those rate hikes for the length of the fixed period.
  • Budgeting: This makes it much easier to budget, as payments will stay the same until that fixed rate ends.

Problems with fixed rate home loans

  • Inflexibility: Traditionally fixed rate home loans have been associated with being very inflexible. Many banks place limitations on the number of additional repayments you're able to make during the fixed term before penalties apply. Other restrictions may also include not having access to a redraw facility during the fixed term and not being able to link a 100% offset account to the loan to help reduce interest costs.
  • Break costs: You may also find that breaking out of a fixed rate loan before the end of the fixed term may incur hefty break costs. This tends to occur if you sell your home or refinance over to another lender during the fixed rate term.

More details on fixed loans

Changes to the flexibility of fixed home loans

More recently, some fixed loans have been found offering the ability to repay above the minimum repayments to a certain limit (often around $20,000 over the fixed period) and allow redraw of those excess payments.

How long are fixed loan terms?

Most banks allow you to choose fixed rate terms that extend from one year up to five years as standard products. Some banks may even give you a custom option for 6-10 years of fixed interest.

Why shouldn't I fix my home loan?

If you see a fixed interest rate advertised for a three year fixed term, but you know you're likely to sell, renovate or refinance your home within that time, you may want to consider alternative options.

There's also the downside of being stuck paying a higher interest rate if variable rates start to fall. If your fixed term still has a couple of years to run and variable rates drop, you'll miss out on interest rate savings.

Why should I fix my home loan?

When interest rates are at historic lows, borrowers can choose to lock in the low rates. However, predicting the bottom of the interest rate cycle is a challenge that can best even the most brilliant financial minds.

About fixed rate home loans here

Pros and cons of fixed rate home loan

Pros

  • Repayments can't rise during the fixed term
  • Great for security
  • Helps borrowers budget into the future

Cons

  • Interest rates won't drop in line with official interest rates
  • Extra payments are either limited or not allowed at all
  • Penalties apply for paying more than the approved extra repayment limits
  • Large exit fees may apply if you break out of your loan before the end of the fixed term
  • Lower flexibility with loan terms and features
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Variable rate home loans

What is a variable interest rate home loan?

A variable home loan has an interest rate that can rise or fall broadly in line with official interest rates. They are the cheapest for fees and are far more flexible than their fixed counterparts.

These are the most common forms of home loans in Australia. ABS figures for February 2013 reveal that variable rate home loans make up 86.5% of all mortgages. The remaining 13.5% are fixed rate home loans.

Rates last updated September 23rd, 2017
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
Mortgage House Advantage Variable Home Loan - 80 (PAYG Special No Offset)
A home loan with a competitive variable rate, limited fees and plenty of flexibility.
3.64% 3.66% $0 $0 p.a. 80% Go to site More info
loans.com.au Essentials - Variable (Owner Occupier, P&I)
A basic home loan with a competitive rate and low fees.
3.64% 3.66% $0 $0 p.a. 80% Go to site More info
UBank UHomeLoan Variable Rate - Standard Variable Rate Value Offer (Owner Occupier P&I)
Combine a low variable interest rate and free redraw with no application or ongoing fees.
3.74% 3.74% $0 $0 p.a. 80% Go to site More info
Reduce Home Loans Rate Buster 100% Offset Variable Home Loan - Up to $750k (LVR <=80%)
Borrow up to 80% LVR with no ongoing fees and a 100% offset account.
3.54% 3.54% $440 $0 p.a. 80% Enquire now More info
SCU Basic Variable Rate Home Loan
A basic home loan with a low interest rate and a redraw facility available.
3.77% 3.81% $200 $0 p.a. 95% Go to site More info
HSBC Home Value Loan - Resident Owner Occupier only, P&I
Enjoy a low variable rate with no ongoing fees and borrow up to 90% of the value of the property.
3.65% 3.66% $0 $0 p.a. 90% Go to site More info
IMB Budget Home Loan - Special LVR <=90% (Owner Occupier and Principal & Interest only)
A special limited time offer for owner occupiers. An IMB Transaction Account must be opened with this loan.
3.79% 3.84% $445 $0 p.a. 90% Go to site More info
Greater Bank Great Rate Home Loan - Discounted Variable ($150K+ Owner Occupier) New Loans only
A competitive variable rate with a redraw facility. NSW, QLD and ACT residents only.
3.84% 3.84% $0 $0 p.a. 90% Go to site More info
Virgin Reward Me Variable Home Loan - LVR <= 80% ($750k+ Owner Occupier, P&I)
A competitive variable rate home loan with flexible features. You can earn 30,000 Velocity Points for every $100k you borrow (for a limited time, subject to eligibility requirements).
3.79% 3.92% $0 $10 monthly ($120 p.a.) 80% Go to site More info
Tic:Toc Live in Loan Variable Rate
A competitive variable rate product with low fees offered by a 100% online lender.
3.68% 3.69% $0 $0 p.a. 80% Go to site More info
Bank Australia Basic Home Loan - Variable (Owner Occupier)
Pay no ongoing fees on a competitive variable rate home loan.
3.86% 3.87% $0 $0 p.a. 80% Go to site More info
3.69% 3.75% $600 $0 p.a. 80% Go to site More info
Bankwest Equaliser Home Loan - LVR ≤80% (Owner Occupier, P&I & $200k+) new customers only
Enjoy a variable 3 year introductory rate with the Bankwest Equaliser Home Loan.
3.72% 4.19% $0 $0 p.a. 80% Go to site More info
IMB Essentials Home Loan - $300,000+, LVR < 80% (Owner Occupier, P&I)
A competitive variable rate home loan with no ongoing fees.
3.97% 3.97% $0 $0 p.a. 80% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier Special Rate, P&I)
Owner-occupiers can lock in a competitive rate with no ongoing fees. Conditions apply.
3.64% 4.83% $0 $0 p.a. 95% Go to site More info
IMB Budget Home Loan - LVR <=90% (Owner Occupier)
Get a competitive rate without features you may not use.
3.97% 4.02% $445 $0 p.a. 90% Go to site More info
Greater Bank Great Rate Discount Variable with Family Pledge Home Loan - Up to 110% LVR
Requires a family member to act as guarantor. Discounted rate available with family pledge loans. Family pledge loans require no LMI and no deposit. NSW, Qld and ACT only.
3.84% 3.84% $0 $0 p.a. 110% Go to site More info
Heritage Bank Discount Variable Home Loan - LVR <=80% (Owner Occupier) New Customers Only
A discounted interest rate home loan with no monthly fees.
3.97% 3.99% $0 $0 p.a. 90% Go to site More info
loans.com.au Offset Variable - Up to 80% LVR (Owner Occupier P&I)
Take advantage of a 100% offset account along with no annual or application fees.
3.72% 3.74% $0 $0 p.a. 80% Go to site More info
ME Flexible Home Loan Fixed - 2 Year Fixed Rate (Owner Occupier, P&I)
Get a competitive 2-year fixed rate with no application or ongoing fees.
3.74% 4.81% $0 $0 p.a. 95% Go to site More info
Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150,000+ Owner Occupier, P&I)
Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.
3.64% 4.03% $0 $395 p.a. 80% Go to site More info
P&N Bank & Home Loan & Bag
A flexible low-rate variable home loan that lets you combine your loan with other financial products.
3.99% 4.02% $395 $0 p.a. 80% Go to site More info
Beyond Bank Low Rate Special Home Loan - LVR <70%
A special low variable rate for owner occupiers with 100% offset account and no application or ongoing fees.
3.83% 3.83% $0 $0 p.a. 70% Go to site More info
Australian Unity Kick Starter Home Loan
A maximum 80% LVR home loan with no ongoing service fees and a linked transaction account.
3.72% 3.75% $600 $0 p.a. 80% Go to site More info
ME Basic Home Loan - LVR <=80% (Owner Occupier, P&I)
A low variable rate loan with no application or ongoing fees.
4.09% 4.11% $0 $0 p.a. 80% Go to site More info
Australian Unity Health, Wealth and Happiness Home Loan - (Owner Occupier, P&I)
Take advantage of a 0.60% discount on your rate, a 100% offset account and no ongoing fees.
3.99% 4.02% $600 $0 p.a. 90% Go to site More info
NAB Base Variable Rate Home Loan - Owner Occupier (P&I)
A competitive no frills home loan. 350K NAB Rewards Points offer available. Terms and conditions apply.
4.17% 4.21% $600 $0 p.a. 95% Go to site More info
4.57% 4.94% $0 $395 p.a. 80% Go to site More info
3.68% 3.69% $600 $0 p.a. 90% Enquire now More info
St.George Basic Home Loan - Promotional Rate (Owner Occupier, P&I)
A no frills loan with a competitive rate and a maximum LVR of 95%.
3.80% 3.81% $0 $0 p.a. 95% Enquire now More info
Connective Smart Options Basic Home Loan - LVR ≤ 70% (Owner Occupier, P&I)
A variable home loan with $0 annual or monthly fees.
4.33% 4.33% $363 $0 p.a. 70% Enquire now More info

Benefits of variable rate home loans

  • Flexibility & features. Many standard variable home loans,particularly online home loans come with a host of features these days. These features allow a greater ability to pay off a mortgage faster while slashing interest, or conversely, borrow more, redraw on extra repayments or draw down on equity.
    These features allow borrowers a wider scope to use a home loan towards their specific goals.Most variable loans will allow you to make free-free additional payments at any time, with no maximum limit. You should also find that you have access to a redraw facility and more flexible repayment options.100% offset accounts, which can save tens of thousands in interest over the life of the loan and also cut years off a mortgage, are only available on variable home loans. This is a great, hands-off feature, as it saves you interest without the need to make additional repayments. It really takes care of itself as long as you keep a positive balance.
  • Ease to refinance. It is cheapest to refinance from a variable rate home loan. So if you have an eye for a bargain, getting a variable rate home loan is the best way to be able to switch to lenders as cheaper interest rates become available.Remember, refinancing includes selling your home, borrowing more and renovating — not just switching to a cheaper rate. So, if you are thinking of doing any of these things in the near future, it is worth considering a variable rate home loan.
  • Falling interest rates. Only variable interest home loans position borrowers to benefit from falling interest rates — which are usually passed on directly to variable rate customers.While interest rates are low, choosing a variable rate home loan isn't such a tough decision.
  • Low fees. Basic variable home loans are cheaper in fees than basic fixed interest home loans. This is because there is usually a fee charged to fix an interest rate.

Problems with variable rate home loans

  • interest can rise. Interest rates run in cycles. As rates start to rise again, banks pass on those increases to you. This can increase your monthly repayments and make it more difficult for some families to keep up.

About variable rate loans here

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Pros and cons of variable rate home loan

Pros

  • Very flexible loan features
  • Make any number of additional payments without penalty
  • Access extra funds via the redraw facility
  • Easier and cheaper to switch to another loan
  • Typically lower fees

Cons

  • Repayments can fluctuate as rates rise and fall
  • Difficult to predict future interest rate movements
  • Harder to budget when rates are in a rising trend

Split home loans

What is a split rate home loan?

A split rate home loan is a total loan amount divided into two custom portions; one locked into a fixed rate and the other variable.

If you really like the idea of fixing your interest rate, but you don't want to lose the flexible features available on your variable loan, you can choose to split your home loan.

Rates last updated September 23rd, 2017
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
loans.com.au Essentials - Variable (Owner Occupier, P&I)
A basic home loan with a competitive rate and low fees.
3.64% 3.66% $0 $0 p.a. 80% Go to site More info
NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier P&I) First Home Buyer Special
A special rate for first home buyers buying residential property and borrowing over $150K. 350K NAB Rewards Points offer available. Terms and conditions apply.
3.69% 4.86% $0 $395 p.a. 90% Go to site More info
Bank Australia Basic Home Loan - Variable (Owner Occupier)
Pay no ongoing fees on a competitive variable rate home loan.
3.86% 3.87% $0 $0 p.a. 80% Go to site More info
HSBC Home Value Loan - Resident Owner Occupier only, P&I
Enjoy a low variable rate with no ongoing fees and borrow up to 90% of the value of the property.
3.65% 3.66% $0 $0 p.a. 90% Go to site More info
IMB Budget Home Loan - Special LVR <=90% (Owner Occupier and Principal & Interest only)
A special limited time offer for owner occupiers. An IMB Transaction Account must be opened with this loan.
3.79% 3.84% $445 $0 p.a. 90% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Years Fixed (Standard Rate, P&I)
Enjoy a low interest rate and borrow up to 95% (with LMI) of your property's value.
3.74% 4.85% $0 $0 p.a. 95% Go to site More info
3.69% 3.72% $0 $0 p.a. 80% Go to site More info
NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier P&I)
A fixed rate package with flexible repayment options. 350K NAB Rewards Points offer available. Terms and conditions apply.
3.88% 4.89% $0 $395 p.a. 95% Go to site More info
IMB Discount Split Home Loan - Owner Occupier
Discounted rates when you split your rate into fixed and variable portions.
3.84% 4.92% $445 $6 monthly ($72 p.a.) 95% Go to site More info
Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150,000+ Owner Occupier, P&I)
Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.
3.64% 4.03% $0 $395 p.a. 80% Go to site More info
IMB Budget Home Loan - LVR <=90% (Owner Occupier)
Get a competitive rate without features you may not use.
3.97% 4.02% $445 $0 p.a. 90% Go to site More info
NAB Base Variable Rate Home Loan - Owner Occupier (P&I)
A competitive no frills home loan. 350K NAB Rewards Points offer available. Terms and conditions apply.
4.17% 4.21% $600 $0 p.a. 95% Go to site More info
IMB Essential Home Loan - LVR <=90% (Owner Occupier)
Get access to a redraw facility and offset account without the annual fee.
4.19% 4.19% $0 $0 p.a. 90% Go to site More info
NAB Choice Package Home Loan - 5 Year Fixed (Owner Occupier P&I)
A competitive loan with flexible features. 350K NAB Rewards Points offer available. Terms and conditions apply.
4.59% 5.01% $0 $395 p.a. 95% Go to site More info

Benefits of a split rate home loan

  • Flexibility and security: Split rates let borrowers take advantage of the best aspects of both loan types. A fixed component is locked in for the next few years, so borrowers have the confidence of known repayments on that portion. A variable component gives borrowers access to many of the flexible features and additions they want — notably extra repayments and redraw.

Problems with split rate home loans

  • Break costs: A part of a split rate loan is made up of a fixed rate component, so the same steep costs apply if the loan is paid out early, which make refinancing during the fixed period very costly.
  • Fees: It will usually cost a couple of hundred dollars to set up the fixed rate portion of a split rate home loan — over and above what it would cost to establish a basic variable home loan.
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Marc Terrano

A passionate publisher who loves to tell a story. Learning and teaching personal finance is his main lot at finder.com.au. Talk to him to find out more about home loans.

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Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤90% ($150K+ Owner Occupier)

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2 Responses

  1. Default Gravatar
    CathNovember 25, 2015

    If we sell our house after 5 years and our loan is variable over 25 years do we have to pay the whole interest owing for total of 25 years or does the bank work out interest owing for 5 years and penalty fees?

    • Staff
      JodieNovember 25, 2015Staff

      Hi Cath,

      Thank you for reaching out to finder.com.au a financial comparison website.

      If you have been repaying your loan with principal and interest repayments you will only be repaying the remaining principal and interest amount that you owe to the lender, they will not also work out how much interest you would have repaid during the life of your loan.

      You may be able to ask your lender for a payout amount for a specific date to give you an idea of how much you will repay.

      Regards
      Jodie

      Regards
      Jodie

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