What is a Personal Loan Redraw? Your Guide

Did You Know About Personal Loan Redraws?

Some personal loans in Australia offer flexibility that could help you manage unexpected expenses. If you've been making extra repayments on your personal loan, a redraw facility might be the financial tool you need to access those funds when necessary.

In this guide, we'll explore how personal loan redraws work, their benefits and limitations, and how to use this feature effectively. Whether you're facing an unexpected bill or planning for a major purchase, understanding redraw facilities can help you make the most of your personal loan.

We’ll also cover Credit24’s loan products. If approved, you could get your funds in as little as 60 seconds*.

What Does Redraw Mean on a Personal Loan?

A redraw facility on a personal loan is a feature that allows you to withdraw extra repayments you've made above your minimum required payments. This reduces your interest costs when you're not using the money, while giving you flexibility to access these additional funds when needed.

In simple terms, a redraw facility lets you access money you've paid over and above your scheduled repayments. For example, if your minimum monthly repayment is $500, but you've been paying $700 each month, after a year you would have an extra $2,400 ($200 × 12 months) potentially available for redraw.

The key benefits of a redraw facility include:

• Financial flexibility to access your extra payments when needed

• Interest savings when you're not using the funds (as they reduce your loan balance)

• The ability to build a financial safety net while still paying down your loan
  

Common Use Cases

Most people use redraw facilities for managing unexpected expenses or funding planned costs, such as:

• Emergency home or car repairs

• Medical bills

• Education expenses

• Holiday costs

• Renovations

• Wedding expenses

Redraw facilities are particularly useful for managing life's unpredictable moments when you need quick access to funds without applying for additional credit.

How Does a Redraw Work?

Not all personal loans offer redraw facilities, and the exact mechanics can vary between lenders. Fixed-rate personal loans rarely offer redraw facilities. If a redraw feature is important to you, make sure to confirm its availability before finalising your loan.

Example: Sarah’s Personal Loan Redraw

• Loan amount: $10,000 over 3 years, variable interest rate of 24% p.a.

• Minimum repayment: $395 per month

• Sarah pays $520 per month ($120 extra)

• After 12 months, she has $1,500 in extra repayments

• When her car needs $600 in repairs, she redraws this amount

• Loan balance increases by $600, with $900 still available for redraw

This flexibility allows Sarah to save on interest when she doesn’t need the money, while still giving her access when unexpected expenses arise.

Are There Any Fees?

The cost structure of redraw facilities varies among lenders. Many offer redraws with no fees, especially online, but others may charge:

• A one-time setup fee

• A fee per redraw transaction

• Higher fees for staff-assisted redraws
  
  

Potential long-term costs include:

• Extended loan term – Redrawing funds means you’re reborrowing money, which can lengthen the loan.

• Additional interest costs – A higher loan balance increases the total interest over the life of the loan.

• Reduced savings – Frequent redraws reduce the interest-saving benefits of extra repayments.

Some lenders also impose:

• Minimum redraw amounts ($500–$1,000)

• Limits on the number of redraws per year

• Advance notice (24–48 hours) for large redraws
  
  

Always check your loan terms carefully.

Can You Redraw on a Personal Loan?

Eligibility depends on factors such as:

• Your loan contract (does it include redraw?)

• Loan type (variable vs fixed rate)

• Extra repayments made above the minimum

• Loan status (must not be in arrears or default)
  

Many lenders require:

• A minimum period (3–6 months of repayments)

• Loan balance below the original loan amount

• Online application or request form for redraw
  

Should You Get a Redraw? Pros and Cons

Pros

• Access to funds when needed

• Interest savings on extra repayments

• No new loan applications or credit checks

• Often cheaper than credit cards or new loans

• Encourages extra repayments
  
  
  

Cons

• Redrawing increases your loan balance and may extend your loan term

• Possible redraw fees

• Minimum withdrawal limits

• Processing delays (1–3 business days)

• Potential temptation for overspending
  
  
  

Tips for Using a Redraw Facility

• Create a strategy: decide if redraw is only for emergencies or planned expenses.

• Monitor your balance: know your available redraw amount.

• Calculate long-term costs before redrawing.

• Consider alternatives for smaller expenses.

• Adjust repayments after redrawing to stay on track.

• Use redraw funds for value-adding expenses.

• Check processing times so you’re not caught off guard.
  
  

Need Quick Cash? Meet Credit24

With Credit24, you won’t have a redraw facility — but you can get a personal loan fast.

• Apply online in less than 10 minutes

• Receive a decision within 12–24 hours

• Get funds transferred within minutes* if approved

• Flexible repayments from 6–36 months

• No early repayment penalties
  
  

We consider applications even from those with less-than-perfect credit, focusing on your overall financial situation.