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
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.
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.
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
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
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
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.)
rates in our home loans section for more details on the
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
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.
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
loans page explains how these loans work and your other
Use our payday loan calculator to see what 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.
Check the fees and charges
Fees and charges can change, so check them regularly and
compare different providers to make sure you are always getting the
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.
Some common fees include:
Other options instead of
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.
Use our budget planner to help work out where your money goes
and how much you can set aside in savings.
Our TrackMyGoals app can help you track and manage your progress
towards your savings goals.
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.
Last updated: 17 Aug 2016