Do you understand the language of interest rates?

The language of lending is confusing to many Australians. Do you know what basis points, comparison rates and LVRs mean?

Your interest rate is the rate in percentage terms charged by the lender for loaning you money. Here's some interest rate jargon fired at borrowers regularly:

The CASH RATE is not the interest rate you get paid on your cash in the bank, it is the official interest rate set by the Reserve Bank. It forms the base for other interest rates.

A BASIS POINT equals 0.01 per cent. So 25 basis points is 0.25 per cent.

The COMPARISON RATE is a rate that includes most of the fees and charges. The comparison rate provides a more accurate account of the true cost.

Source: Herald Sun

Advertisement