If you’re shopping around for a car loan, you’re probably comparing interest rates between lenders. But what about those hidden fees and costs that can catch you off-guard? Comparison rates do the hard maths for you by rolling together the interest rate, upfront fee and service fee into one percentage figure. It gives you a more accurate understanding of the cost of your loan.
In Australia, lenders are required to show a comparison rate as an annual percentage when they advertise an interest rate.
It’s a helpful tool when researching the cost of the loan. But remember, a comparison rate doesn’t include early repayment fees, late repayment fees or deferred establishment fees, and it only applies to car loans that have a fixed term.
Why is the comparison rate important?
You might be surprised to learn that the loan with the lowest interest rate isn’t always the cheapest. Once you factor in the relevant fees and charges, the true cost of the loan could be very different.
A comparison rate takes into account the:
· loan amount
· interest rate
· loan term
· fees and charges
· repayment frequency
The comparison rate paints a more realistic picture of the loan than you can get by simply comparing interest rates. It helps you weigh up your options and find a car loan that best suits your needs.
Where can I find comparison rates?
Financial comparison sites like Canstar, Ratecity, InfoChoice and Mozo can help you find and compare the best deals on personal loans quickly and easily. Keep in mind, comparison sites could be influenced by advertising. It’s always a good idea to check a variety of sources to see a broad range of options and compare the ratings and rankings.
Once you’ve made a short list of the best loan deals, be sure to read the Product Disclaimer Statement (PDS) which explains all the fees and loan features in detail.
Remember, the best car loans aren’t just about what’s written down in black and white. It’s worth checking customer service ratings and reviews to find a car loan provider with a friendly, helpful and responsive team. Good customer service can make a big difference to your overall experience.
Once you’ve decided on the best car loan for you, contact the provider. Don’t be afraid to ask them as many questions as you need to, until you feel satisfied that you’re ready to commit.