Comparing loans beyond the interest rate
With all the news about interest rates recently, it’s not surprising that many borrowers seem obsessed with them. There are the people that typically choose a loan on the interest rate alone. This can be a costly mistake. You’re not necessarily better off by going for the lender with the cheapest rate. Even if two loan products seem very similar on the surface, they may in fact be very different.
It’s important to not just look at the interest rate as the deciding factor between various loan options – differences in the small print can mean thousands of dollars difference between two loan products.
First, the interest rate quoted may be similar or may be the same. If you will be selling the property rather quickly, you should investigate paying higher interest rates with lower application costs and exit costs. There are other costs that may be added on but may not be immediately noticeable. You need to read the fine print and determine exactly how much you are paying and see if you can convert application costs to interest rates and vice versa. Once you understand these components, you need to compare the interest rate using the Comparison Rate. The Comparison Rate gives a clearer idea of the true interest costs after taking into account all the fees and charges involved in establishing the loan. The term of the loan is also very important. You also need to be aware of any early repayment penalties that are associated with the loan.
At the end of the day you will have to make a decision on what you consider is the best loan for you. If you are able to obtain some of the features that are important to you then the fact that the interest rates is a little bit higher shouldn’t scare you off. For instance, if you got a higher loan to value ratio, it may be worth an additional half a percent interest rate. A good finance broker will be able to steer you through all the alternative options and help you find the most suitable loan for you.