What is a comparison rate?
The comparison rate is designed to help you compare the cost of a boat loan between various lenders. The comparison rate combines the nominal (i.e. advertised) interest rate with any foreseeable fees and charges associated with the loan, such as establishment fees and monthly account keeping fees, to give you a more comprehensive picture of what your loan will cost you over the life of the loan.
While the comparison rate helps you to compare one loan against another on a cost basis, it doesn't consider the individual features of a loan such as redraw and direct debit facilities, loan portability and repayment options, all which increase the flexibility of your loan and can make a huge difference to the overall cost of a boat loan.
What costs does the comparison rate take into account?
- Nominal interest rate
- Loan approval and any other up-front fees
- Known ongoing fees
What does the comparison rate exclude?
- Government and statutory fees – these are standard regardless of lender or loan type
- Insurance premiums like comprehensive car insurance.
- Fees and charges that are event-based and may or may not apply throughout the life of your loan. e.g. early repayment fees.
How is the comparison rate calculated?
The comparison rate is calculated in accordance with a standard formula, specified by the regulations, which takes into account;
- The amount borrowed
- The term of the loan
- The frequency of repayments
- The interest rate
- Ascertainable fees and charges connected with the loan except for government charges.
Generally, for personal loans, the comparison rate is calculated using a specific amount and loan term using the base interest rate, based on industry regulations.
It's important to clarify that any advertised comparison rate is designed to be a guide only. Your actual comparison rate may be different depending on your individual circumstances.
What is a comparison rate schedule?
A comparison rate schedule details the various rates that apply to the lender's products at various loan terms and various loan amounts.