Possible Savings from Larger Loans
Wednesday, January 9th, 2008Some people may actually save money by taking a loan if the amount falls into a tier of favorable size, says independent product research firm Defaqto.
The lower tiers tend to carry the highest interest rates, so borrowers may actually be paying more when borrowing a smaller amount. This is especially true when loan providers have two tiers for loans between £1,000 and £5,000.
David Black, Defaqto’s principal consultant on banking, cautions borrowers to do their research before deciding what sum they want to borrow. He says it is possible to save quite a bit on interest charges with a bit of work.
A borrower can save as much as £1,000 by borrowing a larger sum and repaying it over a longer term.
A large tier rate may not indicate noncompetitive interest rates, so Mr. Black advises borrowers to pay attention when shopping for a lender.
Defaqto research further reveals that shopping for more favorable rates on credit card can also produce significant savings. Consumers have little incentive to stay with a company that has high rates.