fbpx
  1. Finance Tips
  2.  → Comparison Rates Explained

Comparison Rates Explained

Nov 24, 2016 | Finance Tips

All the lingo of a car loan getting you confused? Here’s your go-to guide for comparison rates.

The entire world of finance can be more than a little hard to wrap your little head around. When on the market for a vehicle loan, you will hear “interest rate”, “establishment fees”, “gap insurance” and many, many more puzzling terms. The confusion for the average Joe would undoubtedly build-up, so we are here to help. This is your go-to guide to explaining the loan comparison rate.

The Basics: What Is A Comparison Rate?
A comparison rate is a way to help consumers looking to buy to identify the true cost of a potential loan. The rate will lump the interest rate plus fees and charges into one single percentage figure. It is the best way for a borrower to compare overall rates against different institutions so they can find the best loan for their situation.

From 1 July 2003, the Australian Government made it compulsory to display a comparison rate for any advertisement of a credit rate, however, what is advertised may not always be the rate offered to a customer. This will only be set in stone once you are approved and sign on the dotted line for a loan of any kind.

What Does A Comparison Rate Include?
The rate will be a variety of amounts made up of:

  • The amount of the loan
  • The term of the loan
  • The repayment frequency
  • The interest rate
  • The fees and charges connected with the loan (excluding government charges).

What Does The Comparison Rate Exclude?
In most cases, a car’s stamp duty will be included in the final cost of the vehicle, so this relates to the finance of the vehicle amount rather than costs included in the comparison rate. Exclusions of the comparison rate include:

When shopping around for a motor vehicle loan, it is always best to take note of the comparison rates as most financial institutions advertised interest rate does not take into account additional costs of the loan such as establishment fees, approval fees, and any ongoing or upfront fees.

A loan calculator on a financial institution’s website is also a handy tool for when you are chasing an estimated quote prior to filling out an enquiry form.

The information contained in this blog is accurate only at the date of publication. 

Comparison Rates Explained

Nov 24, 2016 | Finance Tips

Share this article

WRITTEN BY

WRITTEN BY

Makala Elliott

Makala is the Marketing Manager at Finance One. She has worked in the Finance and Lending industry for over 10 years, gathering a wealth of experience. She is passionate about helping Australians get back on track with their finances by passing on her knowledge.

Related articles

Say HELLO to our new logo!
News

Say HELLO to our new logo

We are proud to announce that after 11 years, Finance One has a new look. We assure you we are the same friendly, compassionate team striving to help everyday Australians with finance, even if they have experienced a poor credit history.While we...

News

Finance One Turns 10

Finance One is celebrating 10 years in business in 2020. While the business has grown to service close to 14,000 clients, the Finance One motto remains the same - to empower people through personal finance.Specialising in a compassionate...

covid 19 and my loan faq
News

COVID-19 and My Loan FAQs

We have compiled some responses to questions you may have in respect to your loan with Finance One during this time of uncertainty. We are here to help you work through this time. On 11 March 2020, the World Health Organisation declared the...