When planning to purchase goods such as motorcycles or bike loans with credit, in addition to deciding which make or model, smart buyers will also be considering their credit options. For many, that can just involve an online search to see what interest rates are being advertised by different banks and finance companies. If new to the consumer credit scene or haven't applied for finance for a while, buyers may not be aware of the difference between comparing rates and comparison rates. Many may not have even taken a lot of notice of the two different interest rates being displayed by lenders.
When making credit decisions which can involve repayments stretching over several years, buyers should be well-informed on their options including having an understanding of the basic terms and concepts. We appreciate that with the start of each year, a new generation of credit applicants ‘come of age’ and they may not be familiar with credit terminology and requirements.
The financial markets do have a range of terms that do need some explanation to those outside the industry. Interest rates are extremely important to understand as they are the basis for the overall cost of credit and as such, the overall price of the machine being purchase. To increase the knowledge of credit applicants, we provide this explainer of the very important concept of interest rates – advertised and comparison.
Comparison Rates Explainer
There are two types of rates in consumer credit – one known as the advertised rate and the other the comparison rate. The latter does not apply to commercial credit, only consumer credit. Why? Consumer credit is highly regulated through ASIC while commercial credit is not. The regulations determine many aspects of how lenders approach assessing and approving applications.
One of the key regulations is that lenders must display these two rates in advertisements and other communications. Buyers will note that the comparison is always higher than the advertised, we explain.
All types of credit include some form of fees and charges which are additional to the interest charged on the loan. With credit such as for two wheel machines, these fees can include loan establishment costs, lender fees, government charges and others. The fees charged by lenders are not all the same. They can vary across the market of banks and finance companies as lenders can set their fees based on their requirements and costs.
While interest charges are based on the amount borrowed and the repayment timeframe, most fees and charges are one-offs. Some lenders may however, charge monthly fees. These fees are disclosed when quotes or offers are provided. These fees are typically built into the repayments, but some may be requested upfront.
In order to provide consumers some indication of the variations in fees and charges across the market, the comparison rate is required to be revealed.
The advertised rate – the one that is usually most predominant on lender sites, is essentially the base rate. The rate applied to the borrowings over time. The comparison is a rate which is calculated on a specific credit example starting with the base rate and including some of the fees and charges applied by that lender.
The rate displayed will relate to the credit example – it will show typically new goods, with a borrowing of $xxxxx over XX months for an applicant with good credit. With some but possibly not all fees included, the rate is amortised out over the term based on that higher total than just the amount borrowed, hence it is higher than the advertised. Both or one of these may be used when calculating estimates in the Finance Calculator.
Comparing Interest Rates
When comparing rates which should you compare? Well both really. While most buyers will focus on the advertised, comparing both can insight into which lender has higher fees. It should also be noted that lenders display their best rate available which will be for new motorcycles for applicants that have a good credit rating.
Used machines may attract a different rate as can applicants with a less than good credit profile. The credit rating forms an integral part of the assessment and buyers can follow steps at Moneysmart re improving their score. Other factors are also assessed when lenders prepare offers.
Securing Competitive Motorbike Loan Comparison Rates
Rates, credit products, fees and approval criteria vary across the lending market. To secure the best offers, buyers may need to cover a lot of ground and in so doing, impact their very important credit rating. With a vast lender base and exceptional expertise and experience, Jade Bike Loans has the proven ability to secure competitive motorbike loan comparison rates for new secured motorbike financing and used bike loans.
We have 80+ lenders with low motorcycle finance rates from which to source customers the best offers. We know the rates and the fees and charges applied by our lender base. Enabling our brokers to secure the lowest offer. Your Jade broker will explain all the details of your offer to ensure you are in a position to make a well-informed decision on credit for your new ride.
For an affordable used motorbike loan contact Jade Bike Loans on 1300 000 003.DISCLAIMER: IN REGARD TO ANY ERRORS OR MISREPRESENTATIONS IN THIS MATERIAL, NO LIABILITY IS ACCEPTED. THE DETAILS, CONTENT AND DATA IS PRESENTED PURELY FOR GENERAL INFORMATIONAL PURPOSES FOR MOTORBIKE BUYERS AND THOSE SEEKING MOTORCYCLE LOANS. THIS IS NOT INTENDED AS THE SOLE SOURCE OF INFORMATION FOR FINANCIAL DECISIONS. IF SPECIFIC ADVICE IS REQUIRED AROUND FINANCIAL DECISIONS, READERS SHOULD SEEK THEIR OWN FINANCIAL ADVISOR.