A comparison rate is often said to reflect the true annual value of a personal loan. Aside from the loan amount, the comparison rate accounts for the interest rate, application fees, processing fees, and usually any other unavoidable fees and charges. The comparison rate is then spread over the total loan term and is expressed as a percentage. The comparison rate only applies to loans on a fixed term.
The term "comparison rate" is often used interchangeably with the term APR or annual percentage rate.
