/24-7PressRelease/ - LONDON, UK, August 26, 2006 - As per a new research done by uSwitch, Over 500,000 borrowers in Britain could be paying more interest on their loan. The research revealed that 540,000 people who procured loans in the past 12 months for less than 5,000 have been paying interest rates, which went up to 19.9%.
Interestingly, some of the borrowers are paying three times more than the usual APR, which was advertised by the same lenders. Moreover, some of the borrowers have been paying four times more than the base rate of the Bank of England.
Well, the only thing that is responsible for this is the tiered rate system, which has been utilised by the lenders. As per this system, a borrower needs to pay a lower interest rate for larger loans and higher interest rate for smaller loans. Well, this system applies to all sorts of loans whether unsecured loans, secured loans or any sort of loan. Consequently, this becomes a huge problem for borrowers, who take a small loan amount and the repayment period extends up to five years.
Nick White, head of personal finance at uSwitch, quoted that: "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 uncompetitive on small loan amounts."
He further added that, "People really need to shop around when they're looking to borrow less than 5k and make sure they are not enticed by headline grabbing rates for smaller loans - providers such as Northern Rock (5.9% APR) and Moneyback Bank (5.6% APR) represent the exception rather than the rule. It would be really encouraging to see more mainstream lenders following this example and reducing the typical APR on lower tier loans."
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