"Comparison Rate is the True Rate"


Comparison rates were introduced a number of years ago, in an effort to help consumers compare ‘apples with apples’ when reviewing different home loans.

It is difficult to compare home loans that have different interest rates and fees. This is why credit providers must give a comparison rate when they advertise a rate or a weekly payment for home loans.

The comparison rate includes the interest rate or weekly repayment amount, plus most fees and charges. Here is an example.



Interest rate

Fees & charges 

 Comparison rate

Home loan A




Home loan B




In the example above, home loan B will cost less than home loan A, even though home loan A has a lower interest rate. However, keep in mind the the features being offered by each loan to ensure in the long run which is going to cost you more.

If you can find the comparison Interest rate from each loan, you can get the true cost of the loan to compare to. When a Lender advertises, they should show  their comparison rate somewhere in the advertisement.

It also pays to read the fine print. Sometimes the comparison rate can be based on an entirely different scenario to yours and won't reflect the loan you are looking for.

Different loan amounts and repayment duration can change it dramatically.

You also need to be aware that a comparison rate doesn’t take into account other costs you may incur at the beginning of the loan, such as loan establishment fees and approval fees. These can vary widely, so you really need to do your research to make sure you’re getting the best deal for your requirements.

The same will also apply to finance on cars, cards and personal loans.

Remember, a loan is about more than the cost – you need to consider other loan features and flexibility factors such as offset and redraw, and fixed versus variable terms.

So comparison rates are a good starting point, but not the be all and end all.


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