With all the finance jargon you see around these days, it has become really difficult to work out how to compare apples with apples in finance. So how do you make sure you’re comparing finance products equally? Simple – use the comparison rate! Read this article to learn more about comparison rates and how you can use them to make smarter finance decisions through comparison.

What is a Comparison Rate?

A comparison rate helps you to determine what a loan or finance product will actually cost over its duration.

It is different to a standard interest rate, also known as an Annual Percentage Rate (APR) in that it also includes all the fees and charges included in the loan as well as the Annual Percentage Rate. It provides a more ‘real’ or true cost indication of what you will likely pay for your finance.

What makes up a Comparison Rate?

A comparison rate takes into account the loan, the term or duration of the loan, the applicable interest rate, the repayment schedule as well as the fees and charges associated with the loan product. It is important to remember that while the comparison rate does include fees and charges for the specific product, it doesn’t include undefinable charges such as early termination/break fees or applicable government fees and charges.

Things to keep in mind when comparing comparison rates

While comparison rates make it much easier to effectively compare finance products, it is also important to consider whether a product and its specific terms and conditions will meet your individual needs and whether you and your asset will meet the specific lending criteria for said product.

It is also very important to consider the features the product will provide such as flexible repayment options (weekly/fortnightly/monthly) and loan terms etc.

Keep in mind that a comparison rate is specific to the loan amount and loan term it is recorded for. For example, a comparison rate on the same loan amount may be different over a different loan term (e.g. 5 years vs. 7 years).

Understanding and comparing comparison rates can make a huge difference to finding a suitable loan product that is right for your individual circumstance. Speak to the friendly team at Loans For U today on 1800 538 287 for an obligation-free discussion about your finance needs or simply get an instant online quote.