Borrowers 'should shop around for personal loans'
Sep 22, 2006
Borrowers have been warned to make sure they shop around for the best deal before taking out a loan.
Some borrowers are being caught out by systems such as 'tiered rates', under which lenders can offer lower interest rates for larger loans and higher ones for smaller loans, claims switching service uSwitch.com.
Around 540,000 people taking out loans of less than £5,000 in the past 12 months have been paying high interest rates of up to 19.9 per cent APR, the company claims.
Uswitch say that loans are undoubtedly the most cost effective option where a customer is looking to borrow large sums of money.
However, with only a few exceptions the rates remain highly uncompetitive on small loan amounts. People really need to shop around when they're looking to borrow less than £5,000 and make sure they are not enticed by headline grabbing rates that are only available on larger loans.
Smaller personal loans remain popular with consumers, with one in six loans taken out in the past 12 months valued at under £;5,000, the company's figures show. The most popular reasons for taking out smaller personal loans are to purchase cars (36 per cent), debt consolidation (30 per cent) and home improvements (ten per cent).
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