Comparison Rates

[Bandita]

I've gotten myself confused about what "comparison rate" is

Is it:

a. The "effectual" rate of the loan (i.e when you add in yearly fees, higher rates in future years {eg. if home starter type loans}, etc - what the interest rate really is)
b. The average of other lenders/similar products rates to compare against
c. Something else?

I always thought it was "a" - but certain comments lately have made me think it's "b"?

Thanks
Jen

 

[LynnH]

You're right, Jen - (a) it is!

Cheers
LynnH

 

[tess85]

Someone else please correct me if i'm wrong, but you can calculate your own comparison rate for a $X loan and Y years:

http://intranets.cannex.com.au/amp/aaprcalc.php
http://intranets.cannex.com.au/sgb/sgbaapr.php

Most of the comparison rates seen are for $100,000 loan over 25 years.

 

[Rolf Latham]

Hiya

The comparsion rate is meant to be the "total" or real cost of a loan, brought back to a simple interest rate so you can compare apples with apples.

Unfortunately, while the sentiment of the legislation introduced was nice, the reality is that you cant compare oranges and carrots and oranges to get an evenly scored result

Alas, its useless for consumers and has helped brokers increase their business, due the confusion.

ta
rolf