The Interest Savers

A FALL IN INTEREST RATES

When interest rates fall your repayments on a loan will be less costly due to the reduced interest charges.
You will not be affected by a fall or a rise in interest rates if you have a ‘fixed’ interest rate loan.

Most lenders will offer you the ability to reduce your repayments to keep the term of the loan the same as the originally agreed term.

If you can afford to keep paying the same repayments, keep doing so … this will result in your loan being paid out earlier and savings of thousands of dollars

A 1 % fall in interest rates can have a dramatic effect on the cost of your loan and the time it takes to pay it out.

EXAMPLE 1:	7 % INTEREST	6 % INTEREST
Loan Amount	$100,000 . 00	$100,000 . 00
Term of Loan	25years	25years
Repayment Frequency	monthly	monthly
Number of Repayments	300	300
Repayment Amount	$ 706 . 78*	$ 644 . 30*

Total Repayments	$212,034 . 00*	$193,290 . 00*
Total Monthly Fees ($10 x 300)	$ 3,000 . 00	$ 3,000 . 00


Total Amount Repaid	$215,034 . 00*	$196,290 . 00*

Decrease in Amount Repaid	---	$ 18,744 . 00*

Reduction in Monthly Repayments	---	$ 62 . 49*

EXAMPLE 2:	Interest 7 %	Interest Falls to 6 %
Interest falls BUT you maintain the same repayment amount.

Loan Amount	$100,000 . 00	$100,000 . 00
Term of Loan	25years	20yrs, 7mths
Repayment Frequency	monthly	monthly
Number of Repayments	300	247
Repayment Amount	$ 706 . 78*	$ 706 . 78*
Total Repayments	$212,034 . 00*	$174,574 . 66*
Total Monthly Fees ($10 x 300)	$ 3,000 . 00	$ 2,470 . 00

Total Amount Repaid	$215,034 . 00*	$177,044 . 66*

Decrease in Amount Repaid	---	*$ 37,989 . 34 i.e. 38 % of the amount borrowed.**

This example shows that if interest rates fall you should continue to make the same repayments as before the fall.

* These figures are for each $100,000 borrowed.