So, how does it work? Essentially, you make 12 months' worth of repayments in 11 monthly instalments throughout the year, allowing you to take a month off. For example, let's say you take out a car loan of $30,000 at a comparison rate of 7.24% p.a. over 60 months. (A comparison rate includes the interest rate as well as certain fees and charges relating to a loan. The aim of the comparison rate is to help you identify the true cost of a loan and compare loans and services offered by financial institutions) If you weren't using the month off option, your monthly repayments would be $597.69 per month. However, if you use the month off option your monthly repayments would be $652.54 per month, with you only making 11 repayments per year instead of 12 repayments.
The month off option must be selected prior to taking out the loan, must be the same month each year, cannot be in the first month of the loan, and only applies to loan terms of up to five years. Using the month off option means that your loan terms remain the same as you are making the equivalent amount of repayments over the same period.
