What is a Comparison Rate?
Whether searching for an interest
rate in
the
paper, on the net you will have noticed that alongside the
annual percentage rate you will see another interest rate – usually a little higher than the advertised
rate. This is due to legislation where all
lenders and
advertisers of interest
rates must disclose the true cost of finance.
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.
Once all of these factors have been taken into account,
and
over a long
term such as
30 years, the
true cost of the loan can be seen. In cases where there are annual or monthly fees, the comparison
rate
will be quite high, however, when the loan is a basic variable loan (no
ongoing fees), the
comparison rate could be the same as
the
advertised rate or only slightly higher.
So, when looking at taking out finance, be sure to have the
comparison rate disclosed. It could make the difference when
choosing a
lender.
DISCLAIMER: While
we have taken all reasonable
care
in producing the information contained in
this
article, we
do
not promise that
it contains all
the information you need to answer all
your questions.
This document
is
for information
purposes only, and must not be
relied upon as
a substitute for professional services or legal
advice.
Diversifi Pty Ltd does not
guarantee the accuracy of information provided by third parties related to this article.
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