A comparison interest rate is a concept which only applies to consumer finance that is in this case, to personal motor loans. The advertised interest rate or current interest rate that is displayed by lenders is essentially the basic, cheapest rate we can achieve and is in some respects the raw rate. But all loans will include some fees and charges by the lender and these can vary from lender to lender and for individual applicants. So when the fees and charges are applied to the loan and averaged across the entire loan term, the interest rate will be higher than the rate that was applied to the principle loan amount. That is the comparison rate. The comparison rate is worked out when all fees and charges have been included in a loan and the total loan amount is averaged over the loan term. It is a requirement by law that all lenders in the consumer finance space display a comparison interest rate. It is based on a specific example of a purchase. For example, a set car which was purchased at a set dollar amount. Read the fine print for details. When comparing interest rates across lenders, consumers should compare the comparison rate as it gives you a better indication of the level of fees and charges applied by that lender.