Member Article

Borrow less but pay more

People taking out personal loans for small amounts are being charged nearly twice as much interest as those borrowing larger sums, research showed today.

The average rate charged on a loan of £3,000 is currently 19.3%, compared with an average rate of 10.3% for people borrowing between £7,000 and £10,000, according to MoneyExpert.com.

There is also a large difference in the ‘best buy’ rates available for higher and lower loan amounts.

Alliance & Leicester currently offers the best rate on a £3,000 loan of 14.7%, compared with a leading rate on a £10,000 loan of 7.6% offered by Nationwide.

The group warned that the lower interest rates available on higher sums may tempt people to borrow more than they need.

Pierre Williams, head of research at MoneyExpert.com, said: “Lenders are not interested in people who want to borrow small sums of money and the worry must be that many borrowers are being forced to either apply for more money than they need or look to unconventional providers who potentially will charge higher rates.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .