When they advertise a loan, banks and other lenders are legally required to display a comparison rate.
The comparison rate is important because it lets you know the true cost of the loan and to easily compare home loans between different lenders.
As well as charging interest, lenders levy fees which can be substantial including establishment fees, approval fees, and other upfront and ongoing fees.
The comparison rate combines these fees and charges along with the interest rate into a single, easy to understand percentage figure.
The lower the comparison rate, the cheaper the loan.
For this reason, it is wise to pay close attention to the comparison rate when you shop around for a loan and not be dazzled by a cheap interest rate.
But remember that cost isn’t the only thing to consider when you are trying to work out which loan is right for you.