# Interest rates for loans

We currently charge an annual interest rate of 4.5% that compounds each fortnight on the outstanding loan balance.

Prior to 1 January 2020 the interest rate was 5.25% per annum.

The outstanding loan balance is the amount we’ve loaned you plus costs and interest accrued, less repayments you’ve made.

We add interest to the outstanding loan balance each fortnight until you repay the loan in full. The longer you take to repay the loan, the more interest you pay.

## Example of the loan balance

George gets his first fortnightly loan payment of \$750 from the Pension Loans Scheme. Interest accrues straight away. We charge interest on this again every 14 days.

At the end of the first fortnight, George’s loan balance is \$751.29. George then gets another \$750 loan payment. We charge interest on the total loan balance, including interest charged on previous loan payments.

At the end of the second fortnight, George’s outstanding loan balance is a total of his:

• first fortnightly payment plus interest, which totals \$751.29
• second fortnightly payment, which is \$750
• interest on the balance of \$1,501.29, which is \$2.59.

That makes his new outstanding loan balance \$1,503.88.

At the end of the third fortnight, George gets another \$750 loan payment. We charge interest on his outstanding loan balance. This means George's outstanding loan balance is now a total of his:

• outstanding loan balance of \$1,503.88 plus the third payment of \$750, which totals \$2,253.88
• interest on the loan balance, which is \$3.90.

That makes his new outstanding loan balance \$2,257.78.

The interest will continue to accrue in this way each fortnight until George pays off his debt. This applies even after he reaches his maximum loan amount and stops getting payments.

This means that George’s loan will increase every fortnight. The longer he takes to pay off the loan, the more he’ll need to pay back.

### Compound interest

The tables show how compound interest accrues on a loan over 5, 10 and 15 years. These are for different loan amounts based on the current interest rate. The tables assume the fortnightly loan amount, interest rate and property values remain the same.

We recommend that you seek independent financial advice before making any financial decisions.

#### Compound interest if you get a fortnightly loan amount of \$50

Year Principal Interest Loan balance

5

\$6,500

\$794.89

\$7,294.89

10

\$13,000

\$3,428.67

\$6,428.67

15

\$19,500

\$8,364.89

\$27,864.89

#### Compound interest if you get a fortnightly loan amount of \$750

Year Principal Interest Loan balance

5

\$97,500

\$11,923.37

\$109,423.37

10

\$195,000

\$51,430.09

\$246,430.09

15

\$292,500

\$125,473.36

\$417,973.36

#### Compound interest if you get a fortnightly loan amount of \$1,350

Year Principal Interest Loan balance

5

\$175,500

\$21,462.07

\$196,962.07

10

\$351,000

\$92,574.17

\$443,574.17

15

\$526,500

\$225,852.05

\$752,352.05

Page last updated: 28 January 2020