Getting the best credit deal

How to compare credit cards and loans

To get the best deal on your loan or credit card, follow our golden rules. Check the interest rate, fees and charges, and don't fall for cheap honeymoon rates without checking what they will cost you in the long term.

Getting the best loan

The first step to getting the best deal on a loan is to work out how much you need to borrow and how you will pay it back.

Smart tip

Don't be tempted to borrow more than you need. If your situation changes and you cannot meet the repayments, you could end up struggling to manage your debts.

Use our borrowing and credit calculators to work out how much you can borrow, and what your repayments will be.

When comparing loans, look at products offered by credit unions and building societies, as well as banks. Don't assume you'll always get the best deal from the largest providers or the biggest advertisers.

Interest rates

Most of your loan repayments go towards paying off the interest your lender charges for borrowing money. That's why it's important to compare the interest rate and the comparison rate to make sure you get the best deal on a loan.

If your loan has a variable interest rate and this rate drops, you can make lower repayments, but if the rate rises you will need to find the extra money to meet the higher repayments. Make sure you factor in possible interest rate rises to work out how much you can afford to borrow. For example, could you still afford the repayments if the interest rate on your loan rose by 2%?

If you're in the market for a home loan, our page on interest rates explains the advantages and disadvantages of fixed and variable interest rates, and shows you how to compare them to find the best deal on your mortgage.

Personal loans for things like a car or a holiday usually have a fixed interest rate, which means the amount of your repayments won't change while you are paying off the loan.

Honeymoon rates

Some lenders offer low interest rates for the first 1 or 2 years of your loan. These low rates are sometimes called 'honeymoon' or introductory rates.

Before taking up this option, find out what the interest rate will be when the 'honeymoon' period ends. Otherwise you could be in for a nasty surprise.

Look for the comparison rate

Lenders must provide a comparison rate in advertising for most loans and credit products that contain an interest rate or a weekly payment.

The comparison rate is the interest rate plus all the fees and charges you must pay on the loan. This rate gives you a better idea of how much the loan will really cost you. (Contingent fees, like early termination fees, are not included in the calculation.)

See interest rates in our home loans section for more details on the comparison rate.

Comparison websites

An easy way to compare some loans is to use comparison websites. These sites allow you to look at the main features of many different credit products at once.

Although these websites are free and easy to use, they usually only show some of the products on the market - not all of them. So you may be comparing fewer products than you think.

Find out more about using comparison websites.

Using a broker

Finance or mortgage brokers can negotiate with banks, credit unions and other lenders to arrange a loan on your behalf. They usually receive a fee or commission from the successful lender, but some brokers might charge you a fee directly. If you are considering using a broker, find out about their fee structure, and compare the fees charged by different brokers before you decide.

A broker can save you a lot of time in finding the most suitable loan, but they don't usually have access to every loan available. See our page on using a broker for more details.

Payday loans

If you need money in a hurry, you could be tempted by advertisements offering quick cash loans (also called payday loans or small amount loans). Although you can get the money fast, these loans can be very expensive, and there are usually much better options available.

Our payday loans page explains how these loans work and your other options.

Find out how much this kind of loan will really cost you.

Payday loan calculator

Getting the best credit card

Credit cards can be a convenient way to pay for things, but it is very easy to spend more money than you can afford to repay.

Some credit cards have a lower interest rate for a certain period - usually when you transfer your balance across from another card. At the end of this honeymoon period, a higher interest rate usually applies. Find out what the interest rate will be once the balance transfer offer expires so you don't end up paying higher interest than you were on your old card.

Before you get a credit card, think carefully about why you want one, how you will pay for it, and what features you need. There are many different types of credit cards to choose from. See how to choose a credit card for more details.

Video: Take control of your money with the credit card calculator

Video about credit card calculator

Work out how much time and money you'll save by making higher repayments on your credit card using our credit card calculator.

Check the fees and charges

Fees and charges can add a lot to the cost of borrowing money. Check your credit contract for all the fees and charges on your credit card, consumer lease or loan. Credit providers also publish this information on their websites.

Smart tip

Fees and charges can change, so check them regularly and compare different providers to make sure you are always getting the best deal.

Some common fees include:


Credit cards

Other options instead of credit

If your loan isn't for a big purchase like a house, it might be cheaper to save up for it instead of using credit. This way you won't be paying interest, fees or charges.

Work out where your money goes and how much you can set aside in savings.

Budget planner

If you are on a low income, you might qualify for a no interest loan to help you get the things you need. Find out more about these and other programs for low income earners, visit our no or low interest loans page.

If you have a home loan with a redraw facility, consider using that instead of taking out a new loan. This can be the cheapest option because home loans have lower interest rates than personal loans or credit cards.

With so much to think about, it's easy to feel overwhelmed when you're looking for a loan or credit card. If you take your time, shop around and read the credit contract you're more likely to get a deal that works for you.

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Last updated: 15 Mar 2018