See how a loan's fees lift its advertised rate into the comparison rate — the single figure that lets you line two loans up fairly.
What the comparison rate tells you
The advertised rate is only part of the cost of a loan. The comparison rate folds the known fees — upfront charges and ongoing monthly fees — back into a single annual rate, so a loan with a low headline rate and high fees sits on the same footing as one with a higher rate and none. Lenders in Australia must publish a comparison rate against the standard example of $150,000 over 25 years, which is why the calculator above opens on those figures. Enter the rate and fees of a loan you are weighing up and you will see the true rate it works out to.
What drives the number
The gap between the advertised rate and the comparison rate is the cost of the fees, spread across the term and expressed as interest. Upfront fees are treated as money you effectively borrow at settlement; ongoing fees are added to every repayment. Two things move the result most: the size of the fees relative to the loan, and the term they are spread over. The same fees weigh more heavily on a small loan than a large one, so a comparison rate quoted against the standard example will not match your own loan exactly. It is a like-for-like yardstick, not a quote.
Use it as a starting point
The comparison rate is a fair first filter, but it ignores rate changes, redraw, offset accounts and the many fees that fall outside the formula. The cheaper loan on paper is not always the one that fits how you actually borrow. Which lender's structure suits your plan is the real question. Book a strategy session and we will work through it with your own numbers.
General information only — not personal financial product or credit advice. The estimate is indicative and depends on each lender's policy, current rates and your full circumstances. AeFin is an Australian Credit Representative (CR 464548) of Finsure (ACL 384704).