Borrowers should shop around for loans

BORROWER apathy and a lack of understanding of annual percentage rates (APRs) could be costing UK customers more than one quarter of a billion pounds, research from Alliance and Leicester Personal Loans reveals.

With typical interest rates from some of the largest UK retail banks set at more than 10 per cent APR for personal loans, people who took out a loan in the last year will fork out over £285 million more in personal loan interest payments than they would if they had a low rate loan from Alliance & Leicester at 5.9 per cent APR.

On an individual personal loan of £7,500 paid over 60 months, borrowers could be unnecessarily overpaying by more than £800 if they do not shop around for a competitive deal, and instead opt for a more expensive loan over 10 per cent.

Research from Alliance & Leicester Personal Loans has also revealed one in four of people have used store cards to help pay towards their Christmas spending. Of these, over half used store cards simply because they were offered them at the point of purchase.

This is despite eye-watering interest rates, with some reaching almost 30 per cent APR, which can easily make the effects of those festive purchases last much longer than the Christmas hangover.

In recent research, 21 per cent said they have made a financial New Year resolution for 2007 to reduce their personal debt. Those with this resolution should consider switching their debt to a low-rate personal loan, which will pay off their debt in an agreed timeframe.

But going straight to a big high street bank for a personal loan could cost more than necessary.

Richard Al-Dabbagh, senior personal loans manager at Alliance & Leicester said: "With many more people starting to feel the pinch and tighten their belts, a good first step is to look around for a good personal loan.

"It might only take five minutes, and could save you hundreds of pounds.

If you already have a personal loan, it can be worthwhile to switch your loan to a cheaper lender."