1. Where can I find the Effective Interest Rate of a loan?

You’ll find it in the fine print of the Product Disclosure Sheet (PDS), or somewhere on the loan webpage. Sometimes it may be difficult to find or even not displayed anywhere. If this is the case, call the loan provider and ask for it!

2. How can I minimise the overall cost of my loan?

• • Flat interest rate loans

For a flat interest rate, once you agree on a loan period (e.g. 3, 5, 6 years), you will need to pay the interest for the full loan period. Even if you end up repaying the loan in full earlier!

On top of that, you may also have to pay a penalty fee for making an early payment.

To save on the cost of a loan with a flat interest rate (e.g. vehicle, hire purchase or personal loan), try to get one for a shorter period but with a monthly repayment rate that you can still afford. And then make your monthly repayments on time to avoid early or late repayment penalties.

• • Reducing balance interest rate loans

For reducing balance interest rate loans, you can save on your interest payments by making early repayments. If you happen to have some additional spare money, you could make a one-off repayment for the loan and bring down the principal amount further. This would reduce the interest you pay.

But first, always check if this option is allowed by your loan provider first.

Calculator

Use this calculator to calculate the effective interest rate of the loan based on the advertised interest rate of the loan.