How does reducing your loan limit affect your loan?

A loan limit is the maximum amount a lender allows you to borrow based on several factors like your financial circumstances, the credit assessment undertaken, value of the property, and your financial history.

What are the benefits?

Customers choose to reduce their loan limits for many reasons. Making this adjustment can help you:

Reduce your minimum monthly payments

Reduce your monthly interest charges

Pay off your loan faster

Free up funds for other needs or savings

Remember to make your final repayment

When you make a change to your loan limit, you're still required to make the final payment based on your original limit before the new, lower payments take effect.

Here’s how reducing your loan limit can benefit you

Let’s say you have an outstanding loan balance of $500,000 and your monthly minimum repayments are $3,669.00.

Over time you have accumulated $100,000 in redraw.

You could apply for a loan limit reduction and bring your loan limit down to as low as $400,000.

With a new loan limit of $400,000, your monthly minimum repayments would be $2,935.00.

What should you consider before reducing your loan limit?

Understand the changes

Once the reduction is approved, the redraw funds used are no longer available.

Do your research

Check that it won't affect your emergency funds or financial goals.

Due diligence

Review and understand any other potential impacts to your loan.

Plan ahead

Make sure the reduction aligns with your long-term plans and budget.

Speak with Client Services

To begin, request a Limit Reduction Form from client services. All borrowers on the loan will need to sign it to proceed. Once submitted, RedZed may conduct a security or verification call to confirm your request. It's a simple process that can help you better manage your finances and reduce your monthly payments.

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