A car loan redraw facility allows borrowers to “redraw” or access any additional funds they have paid into their car loan outside of the regular ongoing repayments. Just like a home loan redraw facility, it is similar to a bank account in that you may deposit funds and may be able to access them at a later date, depending on the lending criteria and eligibility requirements.
The ability to dip into funds deposited into the redraw facility when needed makes it a competitive feature to consider prioritising in your car loan comparison. For example, if you need to pay for mechanical repairs on the vehicle, or even if your energy bill was higher than expected, a redraw facility may offer financial relief.
Not every car loan lender will allow this feature, and often may penalise customers who try to make extra repayments. Some car loan lenders may also charge a fee for using the redraw facility, and it may also come with a minimum redraw cap. It’s worth reading the Product Disclosure Statement (PDS) and terms and conditions of the loan contract before applying.