Redraw vs Offset: Understanding the Differences

When it comes to financing a business, there are a variety of options available. Two of the most popular methods are redraw and offset. Both of these methods can be used to help businesses access additional funds, but they are quite different in terms of how they work and the benefits they offer. In this blog post, we’ll take a closer look at redraw vs offset and explain the differences between the two. 

Redraw is a type of loan that allows businesses to access additional funds by drawing on the equity in their existing loan. This means that businesses can access additional funds without having to take out a new loan. The amount of money that can be accessed through redraw is limited to the amount of equity in the existing loan.

Offset, on the other hand, is a type of loan that allows businesses to access additional funds by offsetting the interest on their existing loan. This means that businesses can access additional funds without having to take out a new loan. The amount of money that can be accessed through offset is limited to the amount of interest that is being paid on the existing loan.

One of the main differences between redraw and offset is the amount of money that can be accessed. With redraw, businesses can access up to the amount of equity in their existing loan. With offset, businesses can access up to the amount of interest that is being paid on the existing loan. This means that businesses can access more money with redraw than with offset.

Another difference between redraw and offset is the type of loan that is used. With redraw, businesses use their existing loan to access additional funds. With offset, businesses use a new loan to access additional funds. This means that businesses have more flexibility with redraw than with offset.

Finally, the cost of redraw and offset can vary significantly. With redraw, businesses typically pay a fee to access the additional funds. With offset, businesses typically pay interest on the additional funds. This means that businesses can save money with redraw if they are able to access the additional funds without paying a fee.

Overall, redraw and offset are two popular methods of financing a business. Both of these methods can be used to access additional funds, but they are quite different in terms of how they work and the benefits they offer. Redraw allows businesses to access up to the amount of equity in their existing loan, while offset allows businesses to access up to the amount of interest that is being paid on the existing loan. Additionally, redraw typically involves a fee, while offset typically involves interest payments. Understanding the differences between redraw and offset can help businesses make the best decision for their financing needs.