The interest rate you are offered on a loan essentially determines the overall cost of the finance and in concert with the loan term, determines how much you will pay each month in repayments. Interest rates are very important and those seeking finance do tend to focus very much on who is advertising what rates for what loans. But with all the asterisks and T&Cs attached to ads and promos for finance and loans from banks, finance companies and from many consumer goods sellers, it is natural that you may wonder - will I get that rate? Are the t&c's going to exclude me from being offered that seemingly cheap deal?
Adding to the uncertainty is that in advertisements and announcements of consumer goods finance must display an advertised interest rate and a comparison rate. As a lender in the consumer goods space, Jade Caravan Finance is required under the consumer credit laws to display both these rates. We do receive queries about what is a comparison rate and why are there two rates and what rate will I get for my caravan loan, so we are well aware that there are many people who are not familiar with the concepts.
In this article we’re bringing you up to speed with an explainer on interest rates, what each is and what you may be offered on your caravan loan.
Difference Between Advertised and Comparison Interest Rates
We have included a lender interest rate comparison chart on our website home page and we recommend you refer to that as you read as it will provide some further clarity to our explanation.
- A consumer loan comprises several elements: the amount you are borrowing known as the loan amount or principal, the interest rate, the amount of interest charged on the loan principal, the loan term being the number of years you have to repay the loan and a range of fees and charges which are applied by the lender.
- Fees and charges are a standard across most loan categories. Most banks and lenders will charge fees for setting up loans. But the actual fees will vary from lender to lender. A loan establishment fees is fairly universal and some charge a monthly fee as well.
- So the actual cost of your loan will be the loan amount plus the interest as charged at the advertised rate plus these fees and charges.
- The interest you will pay is calculated based on the advertised interest rate or the interest rate offered by the lender if that is different from that advertised.
- But as fees and charges vary, just knowing the advertised rate makes it difficult or virtually impossible unless you are a maths genius, for consumers to work out exactly how much they are paying in total for their loan.
- Enter the role of the comparison rate. The comparison interest is formulated based on a specific consumer goods purchase example. This example will be detailed in copy attached to the display for the comparison rate. It is the rate over a set loan term, say 5 years, for a set loan amount, say $30,000, at the interest rate as noted, for new goods and it includes many of the standard loan fees and charges applied by that lender.
- The interest rate may be fixed or variable. If you refer to our lender comparison you will see that some lenders such as Jade offer a secured or fixed interest rate caravan loan while some offer a variable rate personal loan.
- A variable interest rate is a rate that can be changed over the term of the loan while a fixed or secured rate means the interest rate will remain the same over the term of the loan.
- So the comparison rate will always be higher than the advertised rate as it includes some fees and charges. We have to qualify that statement with ‘some fees and charges’ because not all fees may be included on all notifications.
When you are comparing interest rates on consumer loans, you should be paying attention to the comparison rate as well as the advertised rate. As you can see in our lender comparisons, Jade Caravan Finance offers the cheapest caravan loan and the cheapest comparison rate compared to the other lenders as listed.
What will you be offered?
The advertised interest rate we offer applies to applicants with good credit and other aspects of an application. Most applicants may expect to receive this interest rate on their loan. Should a person not meet all the lender criteria, they may be offered the cheap interest rate but with conditions on the loan.
At Jade Caravan Finance every application is treated individually and negotiated to best meet our customer’s preferences.
To allay any doubts and uncertainties that you may have around what interest rate you may be offered, just give us a call for a firm quote on your caravan loan. There is no obligation attached to requesting a quote.
For all your caravan finance requirements call 1300 000 003 and speak with one of our Jade Caravan Finance consultants.
DISCLAIMER: THIS ARTICLE IS PREPARED AND POSTED WITH THE INTENTION OF PROVIDING GENERAL INFORMATION AND NOT WITH THE INTENTION THAT IT BE THE ONLY SOURCE OF INFORMATION ON WHICH TO MAKE FINANCIAL DECISIONS. THOSE REQUIRING FINANCIAL ADVICE AROUND THEIR INDIVIDUAL SITUATIONS SHOULD REFER TO A FINANCIAL ADVISOR. NO LIABILITY IS ACCEPTED FOR ANY MISREPRESENTATIONS OR ERRORS IN THE CONTACT AS SOURCED, IN GOOD FAITH, FROM A RANGE OF SOURCES.