Interest Rates
Interest rates for loans, credit cards, term deposits and savings accounts.
An explanation of comparison interest rates
On CUA home and personal loan advertisements where the interest rate is listed, you will see a second rate appearing after the interest rate. This is the comparison rate. A comparison rate is a tool designed to help consumers identify the “true” cost of a loan.
It is a rate that includes the annual interest rate and specific up-front and ongoing fees and charges relating to the loan, expressed as a single percentage figure. For example, an advertisement displaying an interest rate of 5.49% per annum may have an actual comparison rate of 6.75% per annum.
Mandatory comparison rate legislation took effect on 1 July 2003 and required all lenders to include a comparison rate, in addition to other prescribed information, when advertising an interest rate. Formal changes to this legislation came into effect from 1 July 2010, which meant that comparison rate schedules are no longer required.
Compare with caution
Whilst comparison rates can be a useful tool for comparing the cost of different loans, it is important to recognise that they do have some shortcomings. Specifically, many add-on features which can be enormously beneficial are not taken into account in the calculation of the comparison rate.
When choosing a loan, it is important to consider and research each loan’s features. As an example, all of CUA’s award winning home loans offer members the ability to make additional and lump sum repayments without penalty, free redraws and many other features which differentiate them from those of our competitors.
These features are not reflected in our comparison rates.
