Loan Comparison Rate or Comparison Rate or Loan Comparison Interest Rate means in Australia, lenders are obliged under law in the Consumer Credit Code to include a comparison rate when advertising a loan interest rate, but comparison rates are often misunderstood by some borrowers, which includes Credit Cardholders.

 

A Loan Comparison Rate is a tool to help consumers identify the true cost of a loan by factoring in the interest rate and the fees (establishment fee, approval fee, any upfront or ongoing fees, late payment fees) relating to a loan, converted into a single percentage interest rate.

 

A comparison rate is made up of the following:

§     amount of the loan;

§     term of the loan;

§     repayment frequency;

§     interest rate; and

§     fees and charges connected with the loan.

A Loan Comparison rate is a useful tool for borrowers to compare the cost of different loans, but it is important to consider all of a loan’s features, and not just focus on the comparison rate.

For example, you may see a loan advertised as: Variable interest rate 6.95%, comparison rate 7.28% - based on loan of $150,000 over 25 years. While this comparison rate reflects the true cost of this example loan, it would be a completely different figure for a loan size of $400,000, or for a loan term of 30 years.

Benefits such as redraw, 100% offset and ability to make additional repayments / flexible repayment periods are not included within a Loan Comparison Rate - but they can make a difference to the attractiveness of a loan.

In order to get an idea of the comparison rate that applies to your loan, look at the comparison rate for the amount and term closest to the amount and term of your prospective loan.

For the purpose of the Writer's submission when identifying Eligible Plaintiffs that have paid Material Interest And Fees (over $5,000 in Interest And Fees Revenue in any continuous three year period at a Comparison Rate Over 20% Per Annum), the Comparison Rate Over 20% Per Annum aggregates the interest rate (either on Purchases or Cash Advance), 'Annual Card Fee', Cash Advance Fee, Balance Transfer Fee, Late Payment Fee, Over-the-Limit Fee and any other fee/s.