Every loan gets advertised by its friendliest number. Sometimes that is a low “from” rate most applicants will never be offered; sometimes it is a weekly repayment that fits anything if the term is long enough. The number that cannot be dressed up is the total payable, and it is the one worth reading first.
What total payable is
Every repayment you will make, added up: the amount you borrowed, plus all the interest over the whole term, plus the fees, including any establishment fee financed into the loan and any balloon at the end. One number, in dollars, for what the loan costs from first payment to last.
Under NZ consumer credit law, lenders must disclose the key costs of a loan before you are bound, which is why the number exists on your paperwork. The trouble is where it lives: usually deep in the disclosure, well after the hero numbers have done their work.
Why the friendly numbers mislead
The rate misleads by omission. A lower rate on a longer term can cost more than a higher rate on a shorter one, because interest accrues on the balance for longer. As a worked example using this site’s standard figures: $20,000 at 12.50% p.a. over 4 years is about $248 a fortnight and roughly $25,800 all up. The same $20,000 at 11.50% over 6 years is about $180 a fortnight, and roughly $28,100 all up. The loan with the lower rate and the lower repayment costs about $2,300 more. Nothing dishonest happened in that sentence; that is just what time does to interest.
The repayment misleads by design. Any amount can be made to look affordable per week by stretching the term. When a quote leads with the weekly number and goes quiet about the term, the term is where to look.
“From” rates mislead by selection. The advertised floor belongs to the strongest credit files. Your rate is the one on your offer, and comparing anything else is comparing other people’s loans.
How to use it
Comparing two loans takes ten seconds once you insist on the same two numbers for each: the repayment, and the total payable over the stated term. The repayment tells you whether it fits your fortnight; the total tells you what it costs. If a lender, dealer or broker cannot or will not put the total payable in front of you before you commit, that is an answer in itself.
That standard is the house rule here: every offer a BorrowClub member sees carries the rate, each fee in dollars, the repayment, the finish date and the total payable on one card. The rates and fees page shows the format with worked examples, and the repayment calculator lets you run your own numbers before anyone else is involved.