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I usually say for someone trying to pay off a home:
-Get 100% offset, take cash from here, get atm cards for this account, get it with no fees
-Direct salary crediting into offset account
-Have a credit card, pay for everything that is not cash with a credit card. Repay the card from the offset account before the interest free days are up. This way as much money is in the offest for as long as possible.
-Get a loan that is essentially free to change between fixed/variable or split it at will.
-No ongoing fees
-But most importantly: Lowest interest rate.But the truth is people often do little to no calculations over what makes a difference and what doesn’t. Like direct salary crediting to an offset account and living off a credit card and paying it back at the end of the month or after 30 days for each purchase is never going to put you ahead more than 1 months living expenses. For example if you are in debt $300k and living expenses are $2.5k for the month, if you follow the plan perfectly, the best you can do is basically have an effective debt of $297.5k. A saving of about $3,000 in interest. Now instead imajine you got a loan that wasn’t 7.5% but 7.0% interest rates, the difference ends up being $18,000. If you got one that did both you could save over $21,000.
Just to clarify, in case we misunderstand the idea of direct salary crediting, and how interest works after Daciums comments –
Lets take your example of a 300k loan. Now imagine an extreme situation where you are paying a huge 1/4 percent more on your loan (unlikely if you have done a bit of shopping around) but it allows you direct salary crediting, the .25% cheaper loan does not. The interest componant of 300k per annum on a monthly basis is $62.50 @ .25% interest. The idea of direct salary crediting if it can be used correctly is that instead of spending all your pay, and the extra $20 or $50 you have in your wallet, is that it stays in your loan, thus reducing the interest paid. Lets say only $20 per week gets left behind in your loan. That is a saving of $86.60 in interest for the month using the above scenario and interest rates . Thus the more expenisve loan interest rate in this case, WOULD result in the loan being paid off quicker all things being equal.
