# Interest rates for loans

We charge an annual interest rate of 3.95% that compounds each fortnight on the Home Equity Access Scheme loan balance.

The interest rate is set by the Minister for Social Services. We will tell you if it is going to change.

The outstanding loan balance is the amount weâ€™ve loaned you plus costs and interest accrued, minus repayments youâ€™ve made.

We add interest to the outstanding loan balance each fortnight until you repay the loan in full.

The longer you take to pay a loan back the more interest youâ€™ll accrue and have to pay back.

You should get independent financial advice before making any financial decisions.

Use the Home Equity Access Scheme calculator to see how interest will accrue on your loan if you apply for one.

## Examples

### Example of loan balance calculation

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

At the end of the first fortnight, Georgeâ€™s loan balance is \$751.14. 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, Georgeâ€™s outstanding loan balance is a total of all of these. His:

• first loan payment plus interest, which totals \$751.14
• second loan payment, which is \$750
• interest on the balance of \$1,501.14, which is \$2.28.

That makes his new outstanding loan balance \$1,503.42.

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 \$2,256.84. Thatâ€™s a total of both his:

• outstanding loan balance of \$1,503.42 plus the third payment of \$750, which totals \$2,253.42
• interest on the loan balance, which is \$3.42.

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 Georgeâ€™s loan will increase every fortnight. The longer he takes to pay off the loan, the more heâ€™ll need to pay back.

## Examples of compound interest

These examples use the current interest rate of 3.95% per annum where thereâ€™s been no repayments to the loan. The interest rate may change over time.

### After 5 years

John gets a loan of \$6,500 under the scheme. He chooses to get a loan amount of \$50 each fortnight.

After 5 years, Johnâ€™s loan balance is \$7,191.20. This includes the compound interest the loan has accrued over the 5 years of \$691.20.

### After 10 years

Suzie gets a loan of \$195,000 under the scheme. She chooses to get a loan amount of \$750 each fortnight.

After 10 years, Suzieâ€™s loan balance is \$239,269.71. This includes the compound interest the loan has accrued over the 10 years of \$44,269.71.

### After 15 years

Doug gets a loan of \$526,500 under the scheme. He chooses to get a loan amount of \$1,350 each fortnight.

After 15 years, Johnâ€™s loan balance is \$718,810.81. This includes the compound interest the loan has accrued over the 15 years of \$192,310.81.

Page last updated: 11 August 2022.
QC 51197