High Interest On Small Loans ‘unjustifiable’
23 August 2006
The ‘Big Five’ have come under fire from financial comparison site uSwitch.com, which claims that the value of loans from the larger institutions are un-competitive and a “rip off”.
The best buy loan for borrowing less than £5,000, according to the website, is from Moneyback Bank at 5.6 per cent APR, compared with an average of 15.4 per cent APR from the ‘Big Five’.
These larger banks are being accused of misleading their customers by advertising typical APRs of around 6.4 on larger loan amounts but applying much higher rates, up to 19.9 per cent, for smaller amounts of borrowing.
“Loans are undoubtedly the most cost effective option where a customer is looking to borrow large sums of money. However, with only a few exceptions the rates remain highly un-competitive on small loan amounts,” said Nick White, head of personal finance at uSwitch.com.
“People really need to shop around when they’re looking to borrow less than £5,000 and make sure they are not enticed by headline-grabbing rates that are only available on larger loans.”