Find out the real cost of your loan with the personal loan comparison rate.
Comparing loans by their interest rates can give you an idea of which will be the more affordable option, but it won't give you as good an idea as the comparison rate will. The comparison rate comprises the interest rate as well as fees, giving you a better idea of the overall cost of the loan. Find out everything you need to know about it in this guide.
What is the comparison rate and how do you calculate it?
As mentioned, the comparison rate reflects the true cost of the loan. It incorporates the interest rate and any fees and charges combined into one rate. These two aspects are what you are ultimately paying back and makes up the cost of your loan.
Comparison rates may be calculated differently depending on the loan, but it's required that the provider tell you how it's calculated. It will be based on a specific loan term and loan amount using the interest rate and fees charged with the loan.
How do I find out the comparison rate?
A comparison rate is usually displayed alongside the interest rate. On finder.com.au comparison tables, you will be able to see a column labelled "comparison rate" for each loan. By scrolling over this rate you will be able to see how it's calculated.
Why shouldn't I look at the interest rate?
Checking the interest rate that you'll be charged for a loan is an important part of the comparison process. However, the interest rate isn't the only detail you need to check.
Finding out how flexible the loan is in terms of repayments will give you an idea of what you can and cannot do with your loan over the next few years. Comparing upfront and ongoing fees will give you an idea of the costs you'll need to cover on top of the interest rate.
This is where the comparison rate comes in – you will be able to see the fees and interest rate expressed as a percentage, giving you an easy way to compare a loan's affordability to other loans.
What else should I consider when comparing personal loans?
- Interest rates.
As the interest repayment will make up the bulk of the loan, it’s important to compare. There’s many low rate loans available or you can select a personal loan with a higher rate and more features. The interest rate should be one of the first things you compare when selecting a personal loan. Typically, the lower the interest rate, the cheaper the loan will be for you over the loan term.
- Loan term.
The loan term is the length of the loan. With personal loans, the loan term tends to fall between one to seven years. You should first consider how much you are borrowing and your current financial situation and select a loan term that you are comfortable with.
Fees and charges can end up making a seemingly inexpensive personal loan more expensive. Make sure you know upfront all the fees and charges you may be liable for and compare personal loans based on this.
- Secured or unsecured.
You also need to consider whether you want a secured or unsecured loan. With secured loans, you typically use an asset of yours as security against the loan. With unsecured loans, you don’t have to use an asset of yours as security but they tend to have higher rates as you are seen as a higher risk.
Interest rates and comparison rates are crucial when comparing and selecting a personal loan as they help you understand the true cost of the loan. Start comparing rates today to help find the best personal loan for you.
Compare personal loan comparison rates today
Use the table below to compare a range of personal loans. You can sort by interest rate or the comparison rate to aid in your comparisons.