Interest rate options

If you have a loan with the department you may have the option of selecting the type of interest charged on your loan.

At any time during your loan or when your loan reaches the end of its fixed interest rate period, you may change from:

• Fixed to variable
• Fixed to fixed
• Variable to fixed.

However, please note that there may be an extra amount charged if you pay out your fixed loan, convert to a variable or another fixed interest rate, before the three year fixed term has expired.

What is a fixed interest rate?

The fixed interest rate option allows you to fix the rate for about three years. If you start with a fixed rate, it is fixed from the day your loan is approved. The interest rate cannot increase or decrease during this time, regardless of what happens to interest rates generally.

Advantages

Fixed interest rates protect you from unexpected increases in your repayments caused by uncertain variable interest rates. They offer stability so you can budget with certainty for your loan repayments.

Disadvantages

If the variable interest rates of banks and building societies reduce, your interest rate will not go down for the three years or so that the interest rate is fixed. An extra amount may also be charged if you pay out your fixed loan or convert to a variable or another fixed interest rate, before the three year fixed term has expired.

To find out the current interest rates offered by the department, please phone 1300 654 322 for the cost of a local call.

What is a variable interest rate?

The variable interest rate option is a loan with an interest rate which can vary up or down over the term of the loan. From time to time, variable interest rates may be higher or lower than the three year fixed interest rates.

Advantages

Your interest rate will be comparable to other interest rates in the market. This means if interest rates fall, generally your rate will also reduce resulting in more of your monthly repayment going towards reducing your loan balance.

Disadvantages

Interest rates may increase at any time depending on current financial conditions. If interest rates increase, it will take more time to pay off your loan. You may be required to increase your repayments if they will not be enough to repay the loan within the maximum term you are allowed. However, even if you are not required to increase your repayments, you should think about doing so, because otherwise the length of your loan and the number of repayments you have to make will increase (because there will be more interest to pay off).

To find out the current interest rates offered by the department, please phone 1300 654 322 for the cost of a local call.

Variable interest rates are advertised on the last Monday of each month in the Courier Mail.

More information

To find out more detailed information about making repayments, contact the department.