How do I compare two loans properly?

Compare the total cost over the loan term, not just the advertised rate — a lower rate with high fees can cost more than a slightly higher rate with no fees. Add up the repayments plus all fees for each loan over the same term and amount. That's what the legally-required 'comparison rate' tries to capture in one number.

What is a comparison rate?

A comparison rate is a single percentage that combines the interest rate with most standard fees and charges, so you can compare loans like-for-like. Lenders must display it next to the advertised rate. It's a useful guide, but it's based on a standard example loan, so always check the total cost for your actual amount and term.

Should I always pick the cheapest loan?

Cost matters most, but features can be worth more than a small rate difference. An offset account, free extra repayments, or a redraw facility can save you thousands over the life of a loan — sometimes more than the gap between two rates. Weigh the total cost against the features you'll actually use.

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Compare two loans side by side — including fees, not just the headline rate — to see which one actually costs you less over the full term.

Last verified: 5 May 2026

Which loan is actually cheaper?

Not always the one with the lower rate — fees matter. Compare the total cost (repayments + fees) over the same term. That's what the comparison rate is for. Source: ASIC MoneySmart.

Worked example. On a $500,000 loan over 30 years, a 5.99% loan beats a 6.25% one by roughly $30,000 in total interest — but high annual fees on the cheaper-rate loan could close that gap, which is why you compare the total.

General information and estimates only — not financial, tax, or legal advice. Always verify with a licensed adviser or the ATO.

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