Repayments on larger loans could cost less
Published On 9 January 2008
By taking out slightly larger loans with the same company, borrowers could save themselves money.Following a review of the personal loans market, financial research company Defaqto revealed that larger loans often carry the lower interest rates.
In some cases, borrowing a fractionally greater sum of money could dramatically decrease the size of repayments.
The company cited the example of lender Lombard Direct, with whom taking out a loan of £5,000 instead of £4,999 would save a borrower as much as £1,015.80 over a five year period.
This anomaly is due to the way in which some lenders structure their products, with the smallest loans carrying the greatest interest rates.
David Black, principal banking consultant at Defaqto, advised those wishing to take out a personal loan to tread carefully.
"Borrowers should take care when choosing the size of loan they want, as a little effort in researching the interest rates charged on different tier levels could save them a considerable amount of money," he said.
He added that other factors needed to considered, such as the length of the loan.
Personal finance information website Moneyfacts similarly recommends that consumers do their research.
"Getting the best deal will mean your monthly repayment will be cheaper and you can escape from your debt burden much earlier," commented analyst Lisa Taylor.
