“Then the offset account that is really key,” said Nicole. “That is a debt-busting secret weapon.”
“It’s actually a magic little Aussie invention and what you can do is house every bit of money to your name. I’m talking your emergency fund, your school fees fund if you’re saving up for that and your holiday cash. You can even put your salary into one of these offset accounts and have that sort of net off your loan balance every month.”
For example, if you have $10,000 in an offset account linked to a $200,000 mortgage, that means you will only pay interest on $190,000.
According to Nicole, not enough people are "maximising" this loan feature.
“Really what you’re doing when you use an offset account is you are using your money twice, both for its intended purpose and to slash your loan interest," explains Nicole.
Sound too good to be true? In some cases, it might be.
“You do have to watch out," warns Nicole. “There are offset accounts and there are offset accounts.”
“There are some tricks that they are being introduced…that don’t save you the exact amount of interest that you would otherwise.”
For more information on how to take control of your finances listen to the ABC’s new podcast, The Pineapple Project.