How to compare personal loan offers

The headline rate is rarely the full story

When lenders advertise a personal loan, the number you see in the largest font is the interest rate — the annual percentage charged on your outstanding balance. It is the most visible figure, but on its own it tells you very little about what the loan will actually cost.

Two loans with the same headline rate can differ by thousands of dollars over their term. The difference comes from fees, repayment structure, and how the rate is applied. A disciplined comparison weighs all of these together.

Comparison rate — the closer-to-true cost

A comparison rate combines the interest rate with most standard fees into a single annualised percentage. It is designed to be a like-for-like figure across lenders so you can quickly see which loan is genuinely cheaper.

Comparison rates have limits. They are calculated against a standard loan amount and term, which may not match your scenario. They also exclude some fees — early repayment penalties, late fees, and optional add-ons rarely appear in the figure. Treat the comparison rate as a useful filter, not a final answer.

Fees that quietly inflate the cost

Look line by line at the loan’s fee schedule. Common charges include:

• Establishment or application fee — a one-off charge to set up the loan, often a few hundred units of currency.
• Monthly account or service fee — a recurring charge that compounds across the loan term.
• Early repayment fee — applied when you pay the loan off ahead of schedule, which can erase the saving from refinancing later.
• Late payment fee — charged when a repayment is missed.

A loan with a marginally higher headline rate but no monthly fee can easily be cheaper than a low-rate loan with a recurring service charge.

Total cost over the full term

The most reliable comparison is total cost: principal repaid plus all interest and fees paid across the life of the loan. This single figure absorbs every variable — rate, fees, frequency, and term — into one number you can rank.

When comparing offers, line up the total cost of each option assuming the same loan amount and the same term. If one lender offers a shorter term at a lower rate, also model what the longer-term loan would cost you in extra interest.

Fixed vs variable rates

A fixed rate locks your repayment for a set period, giving you certainty but typically less flexibility. A variable rate can move with market conditions — your repayments may rise or fall, and you usually retain more flexibility to make extra repayments without penalty.

Neither is universally better. The right choice depends on how comfortable you are with repayment uncertainty and how soon you expect to repay the loan.

Next steps

Use our loan comparison calculator to enter multiple offers side by side and see total cost ranked. To model a single loan in detail, try the personal loan repayment calculator.