Money
How to compare two loans properly
The loan with the lowest rate isn't always the cheapest once fees and timing are included.
Lenders advertise rates, but fees add to the cost. Upfront fees are paid once, ongoing fees are paid every month, and a lower rate saves money slowly over many years.
Worked example: $500,000 over 30 years
| Loan A | Loan B | |
|---|---|---|
| Rate | 6.20% | 6.00% |
| Upfront and monthly fees | none | $1,000 plus $10 a month |
| Monthly repayment | $3,062.34 | $2,997.75 |
| Interest over 30 years | $602,444 | $579,191 |
| Fees over 30 years | $0 | $4,600 |
| Total cost | $602,444 | $583,791 |
💡 Pro Tip: Loan B is cheaper by about $18,653 over the full term. After 5 years it is ahead by about $3,411, so the fees take a while to pay back.
Questions to ask
1
How long will I keep the loan?
If you expect to refinance or sell early, upfront fees and the first few years matter most.
2
What are the ongoing and exit fees?
Monthly or annual package fees and discharge fees add up.
3
What features do I get?
Offset accounts, redraw and extra repayment rules can be worth more than a small rate cut.
4
What does the comparison rate say?
It folds common fees into one rate, but only for a standard loan size and term.
✨ Key Takeaways
- Compare total cost, not just the rate.
- Include fees paid over the whole time you will hold the loan.
- Features like offset can change the real cost.
- Check the lender's comparison rate and speak to a licensed adviser.
Open the loan comparison calculator →
You may also like…
How to create a family emergency grab binder
Crucial documents, insurances, medical history and offline passwords for bushfire or storm…
How to check if your retirement savings are on track
Work out the balance you might reach, the income it could pay, and how much more to save, …
How to organise a profitable weekend garage sale
Permits, change floats, clear pricing tables, signage and timing for quick sales.
How tax refunds and bonus tax work
Why you get a refund or a tax bill, and why a bonus is not taxed at a special rate.
How to pack for a trip without forgetting anything
Pack from a list, in categories, and keep the essentials with you.
How salary sacrificing to super works
What happens to your tax, take-home pay and super when you put pre-tax pay into your fund,…