6 July 2006
The HSBC personal loans scheme gives borrowers a quarter of the interest they have paid back when the final payment is made.
But price comparison site uSwitch.com says that the fact that only loans paid back over a full term qualify for the rebate means consumers should think carefully before taking up the offer.
"Given that a typical borrower is more likely to repay their loan early than see out the full term, this 'incentive' is immaterial," said Nick White, head of personal finance at the company.
"It seems clear that HSBC's rationale for introducing this novel offer is to discourage early repayment and offer 'loyal' customers better rates."
He added: "Anyone thinking about taking out this loan should think about whether they are really likely to benefit from the end-of-term rebate, or whether they would be better off with an alternative product that offers a lower standard rate and lower early settlement fees."
Consumers can benefit by choosing loans with other companies offering lower interest rates and do not penalise borrowers for repaying early.
There are currently 15 loans with interest rates of under 6%. MoneyBack Bank and Direct Line have a typical APR of just 5.6%.
Make a personal loan comparison with uSwitch.com and find the personal loan best suited to your needs
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