Dozens of financial websites remove loan calculator

The Australian Securities and Investments Commission (ASIC) has acted to have loan calculators removed from more than 100 financial organisations' websites.

ASIC said the calculator misleadingly claimed customers could pay off their mortgage sooner if they chose a line of credit home loan.

ASIC said the calculator provided by infochoice.com.au was incorrect because the following assumptions were not made clear to the consumer: extra repayments were credited to the line of credit but not to the standard loan; and the line of credit was at the same interest rate as the home loan.

"Most lines of credit charge higher interest rates than standard home loans, so when you stop to think about it, it was extraordinary to suggest that paying higher interest could pay off a loan sooner," said Greg Tanzer, ASIC's executive director of consumer protection and international relations.

The calculator showed the line of credit paid off the loan quicker but didn't clearly state this was due to higher repayments by the customer, ASIC said.

"The only way to pay off your loan sooner is by moving to a loan with a cheaper interest rate or by making extra repayments," Tanzer said.

A line of credit loan generally combines a credit card with a mortgage that doesn't have a fixed term.