Some of our clients have purchased motor vehicles and have asked us…
“What is a Comparison Rate”?
Legally banks and other lenders are required to have on display a comparison rate when advertising any loan.
A comparison rate is a way to help customers recognise the true cost of a loan.
This rate includes both the interest rate and the fees and charges involving taking out a loan, which also combines into a single percentage figure.
A comparison rate is made up of the following:
- the amount of the loan;
- the term of the loan;
- the repayment frequency;
- the interest rate; and
- the fees and charges connected with the loan.
Having a comparison rate is essentially a really useful tool for borrowers to compare the cost of different loans, it is important to consider as a whole the loan’s features, and not just focus on the comparison rate.