Borrowing costs explained
Look at the amount received, repayment schedule and total cost together.
Interest rate and total cost
The interest rate is one part of the price of borrowing. Upfront charges, ongoing fees and the length of the agreement also matter. An annual percentage cost measure can help comparison, but its definition and included charges depend on the applicable rules. Compare the written disclosure and total repayment schedule, not a headline rate alone.
Why a lower payment can cost more
Illustration: 24 monthly payments of 250 total 6,000, while 36 monthly payments of 190 total 6,840. The second payment is lower each month but the total is higher. These figures are arithmetic examples, not loan offers, and exclude any separate charges.
Fixed and variable pricing
A fixed rate remains fixed for the period specified in the agreement. A variable rate can change under its terms. Ask how a change affects the payment, final repayment date and total cost. Do not assume that an initial payment will remain unchanged throughout the borrowing period.
Questions before accepting
- How much money will I receive after any deducted charges?
- How many payments are due, and is there a larger final payment?
- What happens if I repay early or miss a payment?
- Is an asset or guarantee at risk?
- Which charges are included in the disclosed annual cost?
Use the calculator as a comparison tool
Enter consistent amounts and terms when comparing scenarios. The public calculator provides an illustration and does not account for every possible fee or change in rate. Use the lender's written offer to make the final comparison.