How interest rates and comparison rates work
Why two loans with the same headline rate can cost different amounts, and what the comparison rate adds.
ReadRate guides
Start here. Three short guides cover the ideas that decide what a loan really costs you.
Fixed vs variable
The trade-off between a repayment that stays put and one that can move with the market.
ReadWhat affects the rate you are offered
Security, credit history, deposit, term and more, explained from the lender’s point of view.
ReadHow much does a 1% rate difference matter?
A worked example: a $20,000 loan over 5 years at three illustrative rates. Rates are examples, not offers.
| Rate p.a. | Monthly repayment | Total interest |
|---|---|---|
| 7.00% | $396.02 | $3,761.44 |
| 9.00% | $415.17 | $4,910.03 |
| 11.00% | $434.85 | $6,090.91 |
Each two-point step adds roughly $19 to $20 a month here, and over the five years the 11% loan costs about $2,329 more in interest than the 7% loan. Try other combinations in the calculator.
Read this first. These guides are general education. They do not recommend any product, and nothing here is personal advice. For independent, free guidance see MoneySmart.