Finance Education
Lending terms explained in plain English.
Finance terminology can be a barrier to making confident decisions. These explainers cover terms you are likely to come across when comparing loans, regardless of loan type.
Interest rate vs comparison rate
The interest rate is what you are charged on the loan balance. The comparison rate includes most fees and charges, giving a more accurate picture of the loan's overall cost for comparison purposes.
Serviceability
Serviceability refers to a lender's assessment of whether you can afford the loan repayments, based on your income, expenses, existing debts and a buffer for potential rate rises.
Credit score and credit history
Your credit score reflects your credit history, including past loans, credit cards and repayment behaviour. Lenders use it, alongside other factors, to assess risk and eligibility.
Loan-to-value ratio (LVR)
LVR compares the loan amount to the value of the asset or property securing it. A lower LVR generally means less risk for the lender and can lead to more competitive terms.
Fees to look out for
Common fees include application fees, valuation fees, ongoing account-keeping fees, and discharge or exit fees. Understanding the full fee structure helps when comparing the true cost of different loans.
This information is general in nature and does not take into account your personal circumstances. It is not financial advice or credit advice. Consider seeking professional advice before making a decision.