If you look at and put prominence on the interest rate, you’re not alone! Many consumers and brokers who help consumers find personal loans automatically choose to apply for or recommend the loan with the lowest interest rate.
However, this doesn’t always guarantee you’re getting the cheapest or best deal for your circumstances.
Instead of focusing exclusively on the interest rate, you should look at the comparison rate instead.
What is the comparison rate?
The comparison rate helps you to understand the real cost of a personal loan, whereas the interest rate is literally just the finance charged.
The comparison rate includes other fees attached to your loan. These include the establishment fee and any ongoing administration and management fees.
Pay more attention to the comparison rate
The interest rate doesn’t account for those fees. As such, loans with lower interest rates can have high fees. As a result, the comparison rate for these loans can be higher. You subsequently end up making higher repayments and paying back a larger amount overall than if you’d opted for the loan with the lowest comparison rate!
In contrast, a loan with a higher initial interest rate may have lower fees and a lower comparison rate.
It’s easy to see why automatically opting for a lower interest rate can be a bad idea!
How do I find out the comparison rate?
It is a regulatory requirement for all lenders to display the comparison rate for their loans alongside their interest rate in all advertising and communications. Both must be as prominent as each other.
Therefore, it’s easy to find out the comparison rate for a personal loan; you just need to understand what it is telling you!
With NOW Finance, because all our loans are fee-free, the interest rate and comparison rate are always the same!
With a NOW Finance personal loan, you’ll pay no application, no monthly, and no early termination fees.
Even if you find a personal loan offering a lower interest rate than NOW Finance, discover what the comparison rate is once all fees are considered. With no fees on your NOW Finance personal loan, our comparison rate may still be lower, and your loan cheaper as a result.
Focus on the comparison rate to get the cheapest personal loan solution for you
By focusing on the comparison rate when shopping around for a personal loan, you give yourself the best chance to find the best value loan for your needs.
What’s more, with NOW Finance, you can get your guaranteed comparison rate before you apply without affecting your credit score. Get started by checking your personalised rate and finding out whether you’re eligible for a NOW Finance personal loan; discover the potential savings you can make with a no fees loan!
Disclaimer: This article contains general comments and recommendations only. This article has been prepared without taking account of your objectives, financial situation or needs. Before taking any action you should consider the appropriateness of the comments made in the article, having regard to your objectives, financial situation and needs. If this article relates to the acquisition, or possible acquisition, of a particular credit product you should obtain and consider the relevant disclosure documents before applying for the product. The information in this article is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may affect the accuracy of the information.