UK borrowers could be wasting billions on borrowing due to lack of understanding

A recent study has indicated that UK consumers could be wasting millions of pounds every year on their borrowing, simply because of a combination of apathy and lack of understanding when it comes to interest rates and APR (annual percentage rates).

The study was carried out by the Alliance and Leicester, and claims that over a quarter of a billion pounds could be going down the drain due to apathy and lack of financial understanding on the part of consumers in the UK.

Some of the largest UK retails banks are charging over ten percent for a personal loan, and in terms of financial losses this could mean many millions in extra interest payments throughout the UK compared to what consumers would pay if they looked around for a lower rate personal loan. An average loan of around seven and a half thousand pounds using one of these expensive high street deals could mean an extra eight hundred pounds in interest over the term of the loan.

The Senior Personal Loans Manager at Alliance & Leicester, Richard Al-Dabbagh stated: "We have known for a while that the big high street banks do not tend to offer the best deals, whether it is on current accounts, mortgages or personal loans. This research shows the staggering amount that people are overpaying for uncompetitive personal loans, and how much the big high street banks rely on borrower apathy and lack of financial understanding."

Tom Smith
4th February 2007