More than 672,000 borrowers had to fork out for penalty fees on their personal loans in the past year, according to new research.
Borrowers lost out by having to pay out for early redemption penalties of up to two months' interest for repaying the money they owed ahead of time, the study by product comparison website Money Expert and Defaqto found.
Around five per cent of borrowers intend to switch the loan product they have this year, but the study's creators warned that some who are hoping to switch could pay out again if they do not understand well enough how a loan works.
"Too many of us are guilty of focusing purely on the cheapest interest rate when we take out a loan and forgetting to look for the pitfalls and restrictions imposed by the lender," said Sean Gardner, chief executive of Money Expert.
"There has been such an emphasis on rate in the current loans marketplace that many people are oblivious to the finer details of the product. This leads to many people paying penalty charges for early redemption charges unnecessarily." To read more about Loans, click here.
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