The comparison rate is one of the most useful tools available to Australian borrowers when evaluating personal loan offers. It combines the interest rate and most fees into a single annual percentage, giving you a more realistic measure of a loan's true cost than the headline interest rate alone.
The comparison rate formula:
In Australia, lenders are required under the National Consumer Credit Protection Act to display the comparison rate alongside any advertised interest rate.
The comparison rate was introduced in Australia specifically because advertising an interest rate alone gave borrowers an incomplete picture of what a loan would actually cost them.
Before the comparison rate became a mandatory disclosure in Australia, lenders could advertise an attractively low interest rate while charging significant fees that substantially increased the true cost of borrowing. A loan advertised at 6% per annum might carry establishment fees, monthly account-keeping fees, and other charges that effectively pushed the real annual cost to 15% or higher.
The National Consumer Credit Protection Act addressed this by requiring all lenders operating in Australia to display the comparison rate alongside any advertised interest rate. The comparison rate is calculated by combining the interest rate with most ongoing fees, and expressing the combined figure as a single annual percentage rate applied to a standardised benchmark loan.
This benchmark is typically a $30,000 unsecured personal loan over a 5-year term in Australia. Because every lender uses the same benchmark to calculate their comparison rate, the figure can be used to make meaningful comparisons between different lenders and loan products.
A low advertised interest rate can be misleading if it is accompanied by high fees. The comparison rate forces lenders to show the combined impact so borrowers are not deceived by headline figures.
To make comparison rates comparable across lenders, the calculation is applied to a standard benchmark loan of $30,000 over 5 years. Every lender uses the same benchmark, so comparing their comparison rates is a meaningful exercise.
A higher comparison rate relative to the interest rate indicates that fees add a significant cost to the loan. A comparison rate close to the interest rate suggests the fee burden is relatively modest.
The comparison rate is calculated on a fixed benchmark, so for loans with different amounts or terms, it may not perfectly reflect the actual annual cost. It should be used alongside the full fee schedule rather than as the only measure.
The comparison rate does not capture every possible cost. Understanding what is and is not included helps you use it correctly when comparing loans.
Practical Implication: A loan with a low comparison rate but a high dishonour fee could still cost more than expected if you miss repayments. Always read the full fee schedule as disclosed in the loan contract, not just the comparison rate figure, when making your borrowing decision.
These worked examples illustrate how the gap between the interest rate and the comparison rate can vary significantly between loan products and why both figures matter.
Key Takeaway: Both lenders advertise exactly the same 10% interest rate, but Lender B's comparison rate is approximately 3.7 percentage points higher. On a $30,000 loan over 5 years, that difference represents thousands of dollars in additional cost. Without the comparison rate, both loans would appear identical at first glance.
The comparison rate varies considerably across loan types. This table illustrates typical ranges for different personal loan categories in the Australian market.
| Loan Type | Typical Interest Rate Range | Typical Comparison Rate Range | Fee Gap | Speed of Approval | Who It Suits |
|---|---|---|---|---|---|
| Major Bank Personal Loan | 6% to 14% p.a. | 7% to 16% p.a. | Low to moderate | 5 to 10 business days | Excellent credit, stable employment, major bank customer |
| Credit Union or Mutual | 8% to 15% p.a. | 9% to 17% p.a. | Low | 3 to 7 business days | Members with established relationship and strong credit |
| Online Alternative Lender (Breezy) | 29.9% to 39.9% p.a. | Higher — see disclosure | Moderate — fees disclosed upfront | 60 minutes | Employed Australians needing fast access, broader eligibility |
| Buy Now Pay Later | 0% interest (often) | Varies — late fees significant | High if late fees apply | Instant | Small retail purchases with short repayment window |
| Credit Card | 18% to 24% p.a. | 19% to 26% p.a. | Low to moderate | Instant (if pre-approved) | Short-term bridging, revolving credit users |
Important Context: Bank rates in the table above typically apply only to borrowers with excellent credit history, full-time employment with a major employer, and a long-standing banking relationship. Many employed Australians do not qualify for those rates. Alternative lenders like Breezy provide broader access with full fee transparency and faster approval timelines.
The comparison rate is a useful starting point, but it works best as part of a broader evaluation process. Here is a practical framework for using it effectively.
Use the comparison rate as your first filter when shortlisting lenders. It quickly identifies loans where fees are adding significant cost above the headline interest rate, even before you look at the fee schedule in detail.
The comparison rate is calculated on a $30,000 benchmark over 5 years. If your actual loan is $10,000 over 12 months, the comparison rate will not perfectly reflect your cost. Use it directionally and then model your specific scenario using the lender's actual fee schedule.
Always read the full fee schedule to identify any fees not captured in the comparison rate, such as dishonour fees or conditional charges. These can be material if there is any chance of a missed payment during the loan term.
Ask each lender for the total amount payable over the full term of your specific loan amount. This single figure incorporates every cost and is the most direct way to compare two loan offers on a genuine like-for-like basis.
A lower comparison rate is only valuable if you actually qualify for the loan and can access it within your required timeframe. Bank rates may be lower but take 10 days to approve. If you need funds urgently, approval speed is a real part of the cost equation.
Once you have identified a lender, use their loan calculator to model your exact scenario — your loan amount, your preferred term, and the actual fees — to arrive at a precise total cost figure before you apply.
All Breezy fees are disclosed upfront before you sign. No surprises, no hidden charges. Apply online in minutes and receive a decision within 60 minutes during business hours.
Apply NowBreezy Loans Pty Ltd holds Australian Credit Licence 389610. The comparison rate information on this page is provided for educational purposes only and is general in nature. Comparison rates for personal loans in Australia are typically calculated on a benchmark of a $30,000 unsecured loan over a 5-year term. Different loan amounts and terms will produce different comparison rates. Breezy personal loans carry interest rates from 29.9% to 39.9% p.a. depending on loan amount, plus an establishment fee of 20% and a monthly fee of 4% of the original loan amount. A dishonour fee of $27.50 applies to failed repayments. No early repayment fee applies. All fees are disclosed in full in the loan contract prior to signing. Credit is subject to approval. This information does not constitute financial advice.