How do I use this site?

The easiest way to use this site if you know the type of banking product you’re looking for is to choose the relevant category (eg. Home loans, savings accounts, credit cards) from the left-hand menu on the homepage. The main page for each category then offers links to all the comparison tables, calculator tools news and help information relevant to that category. Alternatively, the site is also divided into different sections according to the type of content:

COMPARE Holds all the core content of the site; the tables and selectors allowing you to make comparisons between all the banking products on the market.

CALCULATE Contains all our leading-edge calculator tools to help you do your sums on your own personal borrowing or saving circumstances.

LEARN Offers all our help information on how to get the best banking solution; tips & tricks, guide articles and the glossary.

NEWS & VIEWS Keeps you up to date with news affecting your use of banking services as well as Infochoice’s own analysis of product developments and market conditions.

Also, the homepage has a number of ‘quick find’ options for users. The common banking issues consumers come to this site for help on are listed in the ‘Where do I start?’ menu on the homepage, providing direct links to the relevant section.

For further help on using the site, read the other frequently asked questions in this section.

How do I get a loan from InfoChoice?

InfoChoice is not a financial institution and does not offer loans nor facilitate loans directly. We are an independent comparison service collecting information on loans and other financial services of the various providers in the market. To maintain this independence, Infochoice does not recommend or advise on individual products or institutions. You can, however, contact your choice of provider via this website. Click here for our financial institution contact list, or click on the ‘apply’ links in any of our comparative tables.

What is a ‘comparison rate’?

Comparison rates are based on the average annual percentage rate (AAPR) which wraps up interest payments and fees on a loan and expresses all these costs in one rate. It is designed to reflect the total annual cost to a borrower of a loan. All lenders must now by law include comparison rates in advertisements for their home loans and personal loans to help consumers get a feel for the ‘true’ cost of the loan.

Can I print information from this site?

Feel free to print out our tables and editorial information as long as it’s for your own personal use. Commercial users should heed the copyright notice on this site. For tables, choose File->Print, or File->Print Frame (depending on the browser you are using) and set your paper orientation to Landscape.

Is the interest on protected equity loans tax deductible?

There has been much debate about the deductibility of the interest payments on capital protected loans because of the difficulty in distinguishing between the capital protection component and pure loan interest component of the payments. Only the interest component is tax deductible. The amount of interest available for deduction will be the lower of:

the amount determined by the Reserve Bank’s Indicator Rate for personal unsecured loans
the amount determined on a sliding scale depending on the term of the product (85 per cent for five years, 82.5 per cent for four years, 80 per cent for three years, 72.5 per cent for two years and 60 per cent for one year)

What is margin lending?

From the investor’s point of view, margin lending means borrowing to invest. Investing a combination of savings and borrowed funds allows you to invest more, increasing the potential returns compared to investing savings only. In the same way as property investors will put down a 20-30% deposit and borrow the rest, margin lending allows you to buy a significant share or managed fund portfolio with as little as a 20% deposit. This approach is also known as ‘gearing’.

How does a margin loan compare to a personal loan?

Unlike a personal loan where there is a fixed term and you are paying interest plus principal, margin loans are very flexible lines of credit which have no fixed term. You can draw down and repay the loan at any time and interest is paid on an interest-only basis.

What is an MER?

MERs, or management expense ratios, are common to all managed funds. They are cost ratios calculated to a standard formula by all fund managers to give investors a comparable standard by which to compare the fees on funds.

The formula combines fees like management investment fees, commissions to advisers, manager administration expenses etc and expresses them as one simple percentage rate. Multiply the MER quoted for a fund by the amount of capital you have to invest to get an idea of the annual fee the fund manager will charge.

MERs on actively-managed share funds range from around 1.6 to 5.0 per cent with the average around 2.0 per cent or so. MERs on passive index funds range from 0.3 to around 1 per cent. Nil-entry-fee funds usually have higher MERs and/or exit fees applicable if you sell out within five years or so. These higher fees make up for the fact there is no upfront fee.

These days it is possible to have the best of both worlds – not pay upfront fees and still have lower MERs by buying managed funds through a discount funds broker, or share broker that offers funds too.

What is ‘straight-through processing’?

When a broker offers ‘straight-through processing’ this means trades are fully automated – you’re trading direct into the market yourself. Once you submit a buy or sell order, that’s it, it can’t be cancelled and the trade will be automatically executed. Manual processing sees trades go to a human being in the broker’s office first before being submitted to the market.

What is a margin call?

Under a margin loan arrangement, it is the investor’s portfolio of shares or managed funds bought that provides security for the loan. The risk is that market fluctuations reduce the portfolio’s value to a level where it no longer provides adequate security for the loan. Once prices have fallen far enough so that the ratio of the loan to the portfolio value exceeds the maximum set by the lender, it will step in and make a “margin call”.

The lender will ask for additional funds or assets to reduce the loan size and bring the loan-to-valuation ratio (LVR) back below the maximum. If investors are unable to make the extra loan repayment in cash, they may be forced to sell part of their investment.

It’s better if investors can avoid margin calls and the risks are reduced if the investor doesn’t borrow up to the maximum LVR in the first place, often up to 70 per cent. Lenders often allow a “buffer” of 5 per cent above the maximum LVR which acts to prevent margin calls when the LVR is only slightly exceeded.

Investors should ensure they can always be contacted by their lenders. Borrowers have to react quickly to margin calls, usually within 24 hours. If the lender can’t contact them, it will make the decision on their behalf, usually to sell down the portfolio.

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Valiant Finance Pty. Ltd.(ABN 95 606 560 150) is Australia's leading small business lending specialist. Valiant is an authorised credit representative of Vow Financial Pty Ltd, Australian Credit Licence 390261