At a time of almost constant changes in the finance world – and an absolute overload of information online – it’s easy to see why some consumers are becoming ‘switched off’.
A recent study* about financial literacy found 36% of respondents didn’t realise if they reduced the length of their loan they would also have reduced the amount of interest they paid! It also found 35% had done nothing to educate themselves on banking products and services.
What does that tell us? Well…
It tells us there are potentially a LOT of people who could be enjoying savings on their home loan AND other loan products – if only they knew how.
So how important is financial literacy? Let’s face it, many of us find the ever-changing world of finance and banking complex. And yes…pretty dull. But a lack of interest in educating ourselves about our home loan – usually the BIGGEST financial commitment we have – is often costing us money!
It’s interesting that the same survey found 74% of us don’t know what a comparison rate is…
Do you? And what SHOULD you know?
Comparison rates
Lenders are legally required to display a comparison rate when advertising most loans.
This is a tool to help identify the true cost of a loan by combining all components into a single percentage rate*. It also takes into account loans with a lower introductory rate that reverts to a different interest rate after a set period of time.
It includes:
For example at the time of writing this article, one lender was advertising an interest rate of 4.44%, but the comparison rate was 5.49%. Now that’s a difference of $1,050 interest each year for every $100,000 of borrowing you have. That is a little over $4,100 per annum on the average Australian loan.
The mandatory comparison rate was initially introduced to stop lenders advertising very low interest rates that lured borrowers into loans that actually ended up costing more than they expected. A low rate may look attractive at first glance but it doesn’t always mean it is the cheapest rate.
While the comparison rate can be used as a guide it is also important to consider the features of the loan and how these may benefit your particular circumstances and future goals. The rate alone should NOT be your sole consideration when obtaining finance.
Remember, whether you are looking to buy your first home, upgrade, downsize, refinance, invest in property or even buying a new car, as your finance specialist it is our job to do the research for you to determine the loan product most suitable for your circumstances.
We are your finance concierge, educator, confidant and specialist working for YOUR best finance options without the trickery of advertising low interest rates a lure for your business.
If you are thinking of reviewing your current loan – DON’T do it alone!!!
Our role as your finance specialist is to help you make the best financial decision for your personal situation. We consider factors such as:
AND we look at more than one lender for your solution!!!
Want to know more? Call us TODAY! We’re here to answer any financial queries you may have!
* mebank.com.au online survey June 2017
* An average Australian loan of $398,500 Finder.com.au April 2018
* abc news April 2018
* Different amounts and terms will result in different comparison rates
*Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.