Britons paying the penalty for personal loan confusion

Tuesday, January 31, 2006

Too many Britons are focusing on interest rates and not making themselves aware of other conditions when taking out a personal loan.

That is the view of financial comparison website MoneyExpert.com and Defaqto, who have suggested that not enough people look at the "pitfalls and restrictions" associated with the deals and therefore end up paying fees.

"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 MoneyExpert.com.

"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."

Research carried out by the two organisations found that a staggering 5.38 million people do not understand personal loans, which can often lead to penalties imposed for unwitting mistakes such as early repayments.

MoneyExpert.com and Defaqto research also suggests that around five per cent of people are looking to switch personal loans during 2006, something that could invoke charges if the borrowers are not careful.

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