Car Loans Choice want to make getting your car loan fair and easy. We mention this term a lot: “comparison rate.” What does it mean, and how does it make car finance fairer and easier for you?
A comparison rate is an interest rate that takes into account costs such as loan approval fees, upfront charges and ongoing fees.
Comparison rates are regulated and must conform to a standard formula. The formula is calculated using:
- The bare interest rate;
- How much you intend to borrow;
- Repayment schedule; and
- The length of the loan.
All these different inputs produce a standardised comparison rate schedule, which gives you the power to see most available options from a range of financiers.
What comparison rates don’t include are government and statutory fees (which are standard for all finance products), insurance and “once-off” fees such as asking for statements or early repayment.
This gives you, the buyer, a clearer picture of how much the loan costs overall compared to a “bare-bones” interest rate. These rates might look appealing, but often come with a lot of “baggage” such as fees and charges which aren’t shown clearly.
Want to know more? Contact one of our expert financial consultants.