What Is a Comparison Rate?
The advertised interest rate is only half the story. The comparison rate is the number that tells you what a personal loan really costs once the fees are counted — and knowing how to read it can save you hundreds of dollars.
The definition
A comparison ratecombines a loan's interest rate with most of its standard fees into a single percentage. It lets you compare two loans on a like-for-like basis, rather than being drawn in by a low headline rate that hides high fees.
In Australia, the comparison rate is not a marketing courtesy — it is a legal requirement. Under the National Credit Code, any lender advertising an interest rate for a consumer loan must display the comparison rate right next to it. That rule exists precisely because a headline rate on its own can be misleading.
Worked example — where the gap comes from
Imagine a $20,000 personal loan over 5 years, advertised at an interest rate of 9.99%. It looks sharp. But the lender also charges a $250 establishment fee and a $10 monthly account fee. Here is what those fees do:
$20,000 over 5 years
* Illustrative only. The exact comparison rate depends on the loan amount, term, and fee structure. The point is the direction: fees push the true cost above the headline rate.
Same loan, two very different numbers. The 9.99% is what the interest costs. The 11.2% is closer to what you actually pay. When two lenders advertise similar interest rates, the comparison rate is where the real difference shows up.
What the comparison rate does — and does not — include
Included
- The interest rate
- Establishment / application fees
- Ongoing monthly or annual account fees
Not included
- Early repayment / break fees
- Late payment fees
- Redraw and other optional fees
The catch most people miss
The comparison rate is calculated on a standard example loan, not on your specific application. Borrow a different amount or over a different term and your real rate shifts. Treat it as a tool for comparing loans against each other — not as a personal quote.
See what a rate actually costs you per month
Enter a loan amount, term, and your credit score to estimate your repayment, the rate range you are likely to be offered, and the total cost over the life of the loan.
Try the repayment calculator →Why your rate may differ from the advertised one
Many personal loans are risk-based, which means the rate you are offered depends on your credit profile. Two applicants can see the same advertised comparison rate and be offered very different actual rates. A stronger Equifax score generally unlocks a lower rate; a weaker one, or a high debt-to-income (DTI) ratio, pushes it up.
If you want to understand where you sit before applying, our approval likelihood calculator maps your income, employment, and credit details to a Strong likelihood, Possible — lender dependent, or Unlikely — needs improvement result, and shows what is helping or hurting. To see how the score itself moves the rate, read how credit scores work and what counts as a good Equifax score.
Common questions
What is a comparison rate in simple terms?
A comparison rate combines the interest rate with most standard fees into a single percentage. It exists so you can compare two loans on a like-for-like basis, instead of being misled by a low advertised rate that hides high fees. In Australia, lenders are legally required to display it wherever they advertise an interest rate.
Why is the comparison rate higher than the interest rate?
Because it includes fees the headline interest rate leaves out — typically the establishment (application) fee and ongoing monthly or annual account fees. A loan advertised at 9.99% can carry a comparison rate above 11% once a $250 establishment fee and a $10 monthly fee are folded in. The bigger the gap, the more the fees are costing you.
What fees are not included in the comparison rate?
The comparison rate excludes fees that are not certain at the start of the loan — such as early repayment or break fees, late payment fees, and redraw fees. Two loans can share the same comparison rate but treat early payout very differently, so always read the full fee schedule before signing.
Does the comparison rate show the rate I will actually pay?
Not exactly. By law the comparison rate is calculated on a standard example — for personal loans, typically a set loan amount over a set term. Your real rate depends on the amount you borrow, your loan term, and your credit profile. Use it to compare loans against each other, not as a precise quote for your situation.
Not sure which loan is genuinely cheaper?
A specialist can compare real offers — fees and all — against your situation.
Related guides
This is general information only and not financial advice. Results are indicative and may vary by lender.