What will this loan actually cost me?
In dollars, over the period you will really hold it, with every fee included. Put in the numbers a lender has given you — ours or anyone else's — and compare the totals rather than the headline rates.
- Advanced to you
- $250,050
- Establishment fee
- $11,680
- Legal & disbursements
- $3,990
- Exit fee
- $0
- Interest, capitalised for 6 months
- $26,280
- The same interest, per month
- $4,380
- Loan facility
- $292,000
- Total cost of the money
- $41,950
- Repayable at the end of the period
- $292,000
- Cost per $100,000 advanced
- $16,777
- Equivalent annualised cost
- 33.6% p.a.
Remember: that is 6 months of interest, capitalised into the facility at settlement. You make no payments at all during that time.
Indicative only, and not an offer of credit. Interest is capitalised at settlement for the period shown, on the facility; interest beyond that period is charged monthly on the balance. The equivalent annualised cost is shown so products quoted on different bases can be compared; it is not a comparison rate under the NCCP Act, which does not apply to business-purpose lending.
“When you look at these numbers, look also at the cost of inaction, or of the opportunity missed. It often outweighs the cost of getting the funds quickly.”
Why the monthly rate is the wrong number to compare
Two quotes at 1.2% and 1.6% a month look thirty per cent apart. They routinely are not. A lower rate with a large establishment fee, a minimum term you will not use, and an exit fee can cost more in total than a higher rate with none of those — and the gap widens the shorter the loan. Over three months, fees are most of the cost. The percentage is the smallest part of the answer.
That is what the calculator is for. Convert both quotes to a single dollar figure over the same period, then compare those. It takes a minute and it is the only comparison that survives contact with the actual invoice.
The four things that make two quotes incomparable
- A minimum term. If a loan is written for three months minimum and your settlement lands in five weeks, you pay for three months. Our term is open, so you pay for the weeks you use.
- Whether interest is prepaid. Interest for the first 6 months can be capitalised into the loan, which means no repayments during that period — useful, but it is money you owe, and a comparison that ignores it is not a comparison.
- What is deducted at settlement. Fees taken out of the advance mean you receive less than the loan amount, so the effective cost of the money you actually got is higher than the quoted rate implies.
- The cost of being late. Ask what happens if your exit moves by three weeks. On an open term, nothing — no extension fee, no penalty. Elsewhere it can be the largest number in the transaction, and it is never on the front page.
Everything above applies to us. Amounts run from $20,000 to $5,000,000, to 80% of value on residential security and 70% on commercial, and a real number takes one phone call. 1300 93 83 87, Mon–Fri, 8:30am – 5:30pm Melbourne time.
See if you qualify in sixty seconds
Three short questions, no credit check to apply and no financial statements. A Lending Manager reads it and calls you back with a real answer — not a call centre, not an algorithm.
That's the HomeSec Advantage.
Reviewed by Jason Brockmuller, Joint Chief Executive