Read The Scary Fine Print

Borrowers with a redraw facility should be aware what their bank can do

- Effie Zahos

A few customers hit the panic button when the Commonwealth Bank announced changes to its redraw facilities in August. The fuss centred on the bank’s ability to take money out of your redraw facility if you are behind with your repayments.

While the bank could have done a better job explaining the changes, what it was proposing wasn’t too crazy. Put simply: if you chose to reduce your repayments because you put some money in your redraw facility but then you decided to take the money out again, your reduced repayments will no longer be enough to pay off your debt in the agreed time. As a result the bank will use your redraw money to catch up.

Now while I’m not too fazed about this change – after all, you don’t want to pay any more in interest or take any longer to clear your debt than you have to – there are a few other things about redraw facilities that should concern you.