10 January 2008
Money-savvy borrowers could pay less in personal loan repayments through choosing their loan amounts carefully, Defaqto said yesterday.
A review of the market by the research company found that loan 'tiers' can be played to the consumer's advantage through diligent price comparisons.
Interest rates for personal loans repayment generally increase if the loan is smaller than a certain amount - therefore being charged in a different 'tier'.
For example, both Lombard Direct and Direct Line charge 15.9% APR for a £4,999 personal loan.
However, taking out a loan for £5,000 results in a repayment rate of 7.9% and 8.4% respectively – as it is being charged from a different 'tier'.
Therefore, Defaqto is now advising customers to check the tiers of a provider before deciding how much to take out in a personal loan.
Principal Consultant of Banking at the firm David Black commented: "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."
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