Calculators
Effective Interest Rate Calculator
See what your offset account really does: the rate you effectively pay, how many years it cuts off your loan, and how much interest it saves.
| No offset, minimum repayments | With your offset and extras | |
|---|---|---|
| Monthly repayment | – | – |
| Loan paid off in | – | – |
| Total interest paid | – | – |
| Interest in the first year | – | – |
Want this set up properly? A Soren broker can check your loan has a real 100% offset and that it is linked correctly. Free, 15 minutes.
Book a free callYear-by-year breakdown (with your offset and extras)
| Year | Interest paid that year | Loan balance at year end | Offset balance | Effective rate that year |
|---|
How an offset account shortens your loan
Your minimum repayment is set on day one and it does not move when you put money in an offset. What moves is how much of each repayment goes to interest. The bank charges interest on your loan balance minus whatever is sitting in the offset, so every dollar in there is a dollar they cannot charge you on. On a $500,000 loan at 5.50% the repayment stays at $2,839 a month, but with $50,000 in the offset about $229 of that month's payment stops being interest and starts paying down the loan.
That is the whole trick. You are not paying more. The same payment does more work.
And it builds on itself. Next month the balance is a little lower, so the interest is a little lower, so a little more of the repayment hits the principal. Run that for years, keep adding to the offset, and the 30-year loan in the example above is gone in 17 years and 7 months with nothing changed but where you keep your savings.
Offset or extra repayments?
A dollar in the offset and a dollar paid off the loan save the same interest. The difference is access. Offset money is yours to spend tomorrow without asking the bank. Money paid onto the loan may or may not come back out through redraw, depending on the lender and the product. For an investment loan the gap is wider again: paying the loan down can reduce the interest you claim at tax time, while an offset leaves the loan balance untouched. Check that one with your accountant.
Three things that quietly cancel the benefit
An offset that was never linked to the loan. It happens more than people expect and can run for months before anyone notices. The Offset Account Checker reads your statement and tells you whether the interest you were charged matches what you should have paid.
A partial offset. Some cheaper products only offset a portion of your balance. The calculator above assumes 100%.
A fixed rate. Most fixed loans have no offset or a limited one. If you are about to fix, ask what happens to your offset before you sign.
If you want the month-to-month repayment effect rather than the payoff timeline, the Home Loan Offset Calculator does that.
Last updated: October 2026
How this is worked out. Repayments are the standard principal-and-interest amount for the loan, rate and term you enter, and stay the same in both columns. Interest is charged monthly on the loan balance minus your offset balance, which is how a 100% offset account works. Money added to the offset builds up each month and is never withdrawn. Once your offset equals what you owe, the loan is treated as paid off. The rate stays fixed for the whole term. This is a guide only, not a quote or credit advice; your lender's calculation, fees and any rate changes will alter the result. Soren Financial Pty Ltd, Credit Representative 527161 of Finsure Finance and Insurance Pty Ltd, Australian Credit Licence 384704.