Comparison rates are a fantastic way of making sure that you won’t overspend on a loan and that you’re getting nothing but the very best deal there is. You’ll have to check them out no matter if you’ve taken your first or 10th loan out.
Here’s some valuable information in regards to this largely misunderstood concept. After reading this, you’ll be disappointed you haven’t gotten this knowledge before taking the loan.
What Is the Comparison Rate?
“Comparison rate” as a financial term, is extremely easy to explain: it is the figure you get when you calculate the interest rate and the fees associated with a loan. Therefore, it shows you how much you’ll actually be paying on that loan.
Doing this calculus here will allow you to see the true cost of a deal, which is no small thing. Moreover, this comparison rate is the best tool you can use to compare various offers.
If you’re good with math, you can do it yourself on a piece of paper. If not, use a calculator, just in case. Be attentive to the numbers you’re using. One single 3 instead of a 4, just to give you an example, can have repercussions on the final figure.
Is It Difficult to Use?
By no means. For instance: you’ve found a loan that looks promising enough. You calculate the comparison rate and get the figure you need. Now, you keep on searching for other loans.
Repeat the trick, i.e. calculate the comparison rate then simply compare it to the one of the previous loan you’ve found. Eventually, you’ll discover the best out of them all. Obviously, that’s the one you should get.
Do I Have to Do It Manually Every Time?
No. That would be time-consuming. Various comparison rate calculators are available on the Internet. There are also some providers that specialise in this area. You won’t have to do the math all by yourself.
You just input the numbers you’ve been given and hit “Calculate”. Your comparison rate is a few clicks and keys away. It doesn’t get any easier than this.
Should I Always Calculate the Comparison Rate?
Absolutely. You can’t figure whether a loan is as good as it seems or not if you don’t calculate its comparison rate first. You’ll end up with a product that will be hugely problematic.
Most people don’t give the comparison rate as much credit as it deserves. If they did, they would not have been in so much debt. Make the right call and always get a loan’s comparison rate first.
Conclusion
Thought you could get rid of your home loan sooner and pay it all in full before the set time? Well, that won’t work for lenders, since they get money out of your “timely investments.”
Not all loans have exit fees, however, and some companies even banned their introduction. You may want to talk to your lender if the thought of paying everything off before due date has crossed your mind.
