Advertised rate versus true cost.
The rate a bank puts on its ad and the rate you actually pay are rarely the same number. The advertised figure is a flat rate calculated on your original loan amount, which makes it look lower than what you truly pay.
What banks promote
Advertised flat rate
1.8–3.5%
per annum. The number on the ad, calculated on your original loan amount.
What you actually pay
True cost (EIR)
3.5–7%
per annum for qualifying borrowers. Includes compounding and fees.
The true cost is often close to double the advertised rate.
Explore what fits your situation better
Shorts · Lendela
Check before you consolidate
Shorts · LendelaThe costs hiding inside the offer.
Beyond the rate itself, two charges quietly change what a loan really costs you.
Watch for these
Processing fees typically range from 1% to 10% of the loan amount and are sometimes deducted upfront, so you receive less cash than you borrowed on paper. Early repayment penalties can also apply if you clear the loan ahead of schedule.
This is exactly why EIR sits higher than the advertised rate. If an offer carries a processing fee, it should already be reflected in the EIR. If it is not, that is your cue to ask.
Why tenure changes everything.
A longer tenure lowers your EIR and your monthly repayment, but raises the total amount you pay back. The same loan amount and rate can cost you very differently depending only on the repayment period.
| What you are comparing | Option A | Option B |
|---|---|---|
| Loan amount | $10,000 | $10,000 |
| Advertised rate | 5% p.a. | 5% p.a. |
| Tenure | 12 months | 24 months |
| EIR | 5.2% | 4.7% lower |
| Monthly repayment | ~$875 | ~$458 lower |
| Total you pay back | $10,520 | ~$11,000 higher |
Lower EIR. Lower monthly. But you pay more overall.
Best practice: compare by total payable amount, principal plus interest plus all fees, then optimise for a monthly repayment you can comfortably sustain.
Sanity-check your rate.
A quick benchmark before you commit, so you can tell whether an offer sits in a normal range or stands out as an outlier worth questioning.
Typical advertised rate
1.8 – 3.5%
per annum (what banks promote)
Typical EIR (true cost)
3.5 – 7%
per annum (what you actually pay)
For a full walkthrough of how to compare EIR across offers, see our dedicated comparison guide. It covers the exact checklist to run before you choose.
