# Total cost of credit — what a tradie loan really costs you > Total cost of credit is every dollar a tradie loan costs over its life — interest plus every fee. Here's how to add it up and why a low rate can cost more. Source: https://tradiefinance.co.nz/glossary/total-cost-of-credit Published: 2026-05-15T08:00:00.000Z Category: business-finance Tags: glossary, business-finance Image: https://tradiefinance.co.nz/images/resources/generated/tradie/glossary/total-cost-of-credit-primary.jpg Image alt: A tradie reviewing finance options for Total cost of credit — what a tradie loan really costs you --- The advertised rate is what gets you in the door. The **total cost of credit** is what you actually pay. It is the one number that tells you what a loan costs you start to finish — and it is the number most finance ads quietly leave off the page. ## What it is Total cost of credit is every dollar you hand over for borrowing money, on top of the amount you actually borrowed. That means all the interest across the whole term, plus every fee bolted on — establishment fee, documentation fee, [PPSR registration](/glossary/security-interest-ppsr), monthly account fees, dealer origination, and any early-settlement charge if you pay it off ahead of time. Put simply: add up every payment you will ever make, subtract the amount you borrowed, and what's left is your total cost of credit. A low rate sitting next to a stack of fees can quietly cost more than a higher rate with none. The rate is one ingredient — this is the finished meal. ## How to add it up, and when it matters for tradies The maths is blunt: (regular repayment × number of repayments) + any [balloon](/glossary/balloon-payment) or final lump sum + all upfront and ongoing fees − amount borrowed = total cost of credit. Three things blow this number out, and they're the ones lenders downplay: - **Fees hiding behind a sharp rate.** A 9% loan with a $600 establishment fee and $12/month account fee can beat a 7% loan dressed up with thousands in dealer and broker margin baked into the price. - **A longer term.** Stretching a loan from 4 years to 6 drops your monthly repayment, which feels good — but you pay interest for two extra years. The total cost climbs even though the rate didn't move. - **A balloon or residual.** You pay interest on that deferred lump the whole term because the principal never comes down. Lower monthly, higher total. Every time. ### Worked mini-example Two offers on a $45,000 work ute, both illustrative: | | Offer A | Offer B | |---|---|---| | Headline rate | 7.0% | 9.0% | | Term | 6 years | 4 years | | Fees (est. + monthly over term) | ~$2,400 | ~$900 | | Total interest paid | ~$10,200 | ~$8,700 | | **Total cost of credit** | **~$12,600** | **~$9,600** | Offer A has the lower rate and the lower monthly repayment — and costs you about **$3,000 more** by the end. The longer term and fatter fees do the damage. This is exactly why the total cost, not the rate, is what to compare. ## How it differs from comparison rate A [comparison rate](/glossary/comparison-rate) is a clever shortcut — it folds the known fees back into the interest rate so you get one blended percentage to line offers up against. Useful, but it's still a *rate*: a percentage on a standard example, not your loan. The total cost of credit is the actual dollars on *your* deal, balloon and all. Use the comparison rate to shortlist, then ask your broker for the full total cost of credit in dollars before you sign anything. Any decent lender or broker can hand you the total cost of credit in plain dollars. If an offer only ever talks in percentages, that's your cue to ask: 'What do I actually pay, all in, by the end?' If you're claiming any of it back as a business expense, confirm the tax side with your accountant or IRD. Because we're a broker, not a lender, we place your application across a panel of lenders and lay the real total cost of two or three offers side by side — so you're comparing the finished number, not the marketing. ## See also - [Comparison rate](/glossary/comparison-rate) - [Balloon payment](/glossary/balloon-payment) - [The real cost of a cheap finance rate](/blog/the-real-cost-of-a-cheap-finance-rate) Want the real total run on your next ute or gear? [Book a call](/book-a-call) and we'll line the offers up in plain dollars — no pressure, no jargon. Got a quick question first? Our [help centre](/help) has the short answers.