2 min read
Definition
An offset account is linked to a loan or facility so that the balance held in it is netted off the loan when calculating interest. You pay interest only on the difference.
In plain terms
Keep £20,000 in an offset account against a £100,000 loan and you pay interest on just £80,000 — while the £20,000 remains available to use.
Why it matters for your company
Offsetting puts spare cash to work reducing interest without locking it away, useful for businesses holding buffers. Compare the saving against the flexibility you need. See sweep account.
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