# Interest rate

We currently charge an annual interest rate of 5.25% that compounds fortnightly on the outstanding loan balance.

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

We add interest to the outstanding loan balance each fortnight until you repay the loan fully. 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. He doesn’t accrue interest on this immediately. We charge interest on this after 14 days.

At the end of the first fortnight, George’s loan balance is \$750. George also gets another \$750 loan payment. And we charge interest on the first fortnight’s loan payment.

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

• first fortnightly payment plus interest, which totals \$751.51
• second fortnightly payment, which is \$750.

That makes his new outstanding loan balance \$1,501.51.

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

• outstanding loan balance plus interest, which totals \$1,504.54
• third fortnightly payment, which is \$750.

That makes his new outstanding loan balance \$2,254.54.

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.

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.

The tables show how compound interest accrues on a loan over 5, 10 and 15 years for different loan amounts. 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

\$938.41

\$7,439.41

10

\$13,000.00

\$4,109.40

\$17,109.40

15

\$19,500.00

\$10,178.77

\$29,678.77

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

Year

Principal

Interest

Loan balance

5

\$97,500

\$14,091.19

\$111,591.19

10

\$195,000.00

\$61,641.04

\$256,641.04

15

\$292,500.00

\$152,681.54

\$445,181.54

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

Year

Principal

Interest

Loan balance

5

\$175,500

\$25,364.15

\$200,864.15

10

\$351,000.00

\$110,953.88

\$461,953.88

15

\$526,500.00

\$274,826.77

\$801,326.77

Page last updated: 2 July 2019