Costs, Comparison Rates and 2026 Rules
Comparison rate explained: the mandatory warning, the $30,000 benchmark and what it leaves out
How the personal loan comparison rate is calculated under the National Credit Code, why it carries a warning, which fees it excludes and when it understates your cost.
A comparison rate is a single annual percentage that combines a loan's interest rate with most of its upfront and ongoing fees, so you can compare offers on one number. Under Part 10 of the National Credit Code, a credit provider that advertises an annual percentage rate for fixed-term consumer credit must also show a comparison rate, worked out for a benchmark amount and term set by the regulations, and must include a warning that the rate is true only for the example given. For personal loans the benchmark you will usually see is $30,000 over five years. If your loan is smaller or shorter than the benchmark, fees weigh more heavily and your real cost can be well above the advertised comparison rate.
This guide belongs to the personal loan requirements and comparison rates overview. All rates below are illustrative.
Where the rule comes from
- National Credit Code, Part 10 (Schedule 1 to the National Consumer Credit Protection Act 2009) requires comparison rates in credit advertisements for fixed-term credit for personal, domestic or household purposes when an annual percentage rate is stated.
- National Consumer Credit Protection Regulations 2010 set out the comparison rate warning and the method of calculation, including the benchmark amounts and terms.
- ASIC administers the rules and publishes guidance; Moneysmart explains them for consumers.
Comparison rates are not required for continuing credit such as credit cards and lines of credit, and business loans are generally outside the Code. Comparison rate schedules were removed when the National Credit Code replaced the old Uniform Consumer Credit Code; the requirement now sits mainly in advertising.
What the mandatory warning says
The warning is prescribed by the regulations. In substance it tells you that:
- the comparison rate is true only for the example (amount and term) given and may not include all fees and charges, and
- different terms, fees or other loan amounts might result in a different comparison rate.
Lenders may use a shorter or longer version of the warning depending on the medium. Whatever the wording, read it as a reminder that the comparison rate is a standardised illustration, not a quote for you.
What goes in, and what is left out
| Included in the comparison rate | Excluded |
|---|---|
| The annual interest rate | Government fees, charges and duties |
| Establishment or application fees | Fees that depend on events: late payment, dishonour, early repayment or break fees |
| Ongoing monthly or annual account fees | Optional add-ons such as credit insurance |
| Other fees payable as a condition of the loan | Fees for optional features such as redraw or payment method changes |
ASIC's guidance also notes that a comparison rate only measures cost. It does not reflect features such as extra repayment flexibility, which can be worth more to you than a small rate difference.
How the calculation works
The comparison rate is the interest rate that would make the money you actually receive equal to the present value of everything you pay, for the benchmark loan. In plain terms:
- Start with the benchmark loan, for example $30,000 over 60 months.
- Subtract upfront fees from the money you effectively receive (or add them to what you repay).
- Add ongoing fees to each repayment.
- Find the single annual rate that equates the two.
Worked example (illustrative)
Offer: 9.99% a year, $500 establishment fee, $10 monthly fee.
- Repayment on $30,000 over five years at 9.99%: about $637.26 a month.
- Add the $10 monthly fee: you pay about $647.26 a month.
- Effective money received: $30,000 − $500 = $29,500.
- The rate at which 60 payments of $647.26 are worth $29,500 today: about 11.40% a year. That is the comparison rate.
Without the monthly fee, the same loan's comparison rate would be about 10.72%, so the $10 a month alone adds roughly 0.7 percentage points.
When the comparison rate misleads
Smaller loans and shorter terms
Fees are mostly flat dollar amounts, so they matter more on small loans. Using the same fees as above:
| Loan | Term | Interest rate | True annual cost with fees (approx.) |
|---|---|---|---|
| $30,000 (benchmark) | 5 years | 9.99% | 11.40% |
| $10,000 | 2 years | 9.99% | 17.4% |
The lender's advertised comparison rate would still be 11.40%, because it must be based on the benchmark. Your own cost is far higher. Run your figures in the fee impact calculator and see the fees vs rate worked example.
Risk-based pricing
Many lenders advertise "rates from" a low figure with a matching "comparison rate from". Only applicants with the strongest profiles receive the lowest rate. Your personalised rate, and therefore your personal comparison rate, is set after assessment. Ask for your comparison rate based on your actual offer.
Variable rates
For a variable-rate loan, the comparison rate assumes the current rate stays the same for the whole term. If rates rise, your cost rises too. See fixed vs variable personal loans.
Exit costs you expect to pay
If you plan to repay early, early repayment fees are excluded from the comparison rate but may apply to you. Factor them in yourself, using the early payout guide.
How to use comparison rates properly
- Use the comparison rate as a first filter to shortlist offers with similar benchmarks.
- Check which benchmark each lender used and whether the loan is secured or unsecured.
- For your shortlist, list every fee in dollars and calculate the total amount repayable for your loan amount and term with the repayment calculator.
- Add any fees you are likely to trigger, such as an early repayment fee.
- Compare features: extra repayments, redraw, repayment frequency, hardship approach.
Frequently asked questions
Why does every car loan advert mention $30,000 over five years?
Because the regulations set benchmark amounts and terms for calculating comparison rates, and that is the benchmark normally used for personal and car loans. It keeps advertised comparison rates consistent between lenders.
Can two loans with the same comparison rate cost different amounts?
Yes. Two loans can have the same comparison rate on the benchmark but very different costs at your amount and term, because one may load costs into upfront fees and the other into the interest rate.
Does the comparison rate include insurance?
No. Optional consumer credit insurance or loan protection insurance is not part of the comparison rate. If you buy it, add its cost yourself and remember it is optional.
Is a comparison rate required on a credit card?
No. Credit cards are continuing credit and are not subject to the comparison rate requirement. Compare purchase rates, annual fees and interest-free periods instead.
Sources and where to check
- Federal Register of Legislation — National Credit Code Part 10 and the National Consumer Credit Protection Regulations 2010
- ASIC — National Credit Code guidance and credit advertising
- ASIC Moneysmart — comparison rates and personal loan calculator
- Australian Financial Complaints Authority — complaints about misleading loan information
