Banking Blind - Borrowers in the dark over the real cost of bank loans
Press Release - 1 July 2014
- One in four Brits (26%) believe average APR on a bank loan is between 6-10% - and one in ten (9%) believe it’s less than 5%
- Yet many large banks – including Halifax, RBS and Santander - do not offer rates below 20%
- Small print confusion - only half (48%) are aware banks penalise for early repayment, while an eighth (14%) believe they would be rewarded
The bank has traditionally been the first port of call for consumers looking to take out a short-term loan, believed to offer the best rates and value for money. However, what many consumers do not realise is that they may not be getting the best deal from their bank.
Research from Amigo Loans, the UK’s largest guarantor lender, reveals consumer perceptions on the level of APR charged on loans offered by many high street banks is very different to the reality. A quarter (26%) of Brits believe the average APR on a bank loan is between 6-10%, while one in ten (9%) believe it’s between 1-5% that many of the large banks do not offer rates below 20% - including Halifax (29.9%), RBS (22.9%), and Santander (20.3%)
| Bank | Representative APR | Monthly Repayment | Total Repayment | Early Repayment Fee |
|---|---|---|---|---|
| Barclays | 22.9% | £94.07 | £3,386.69 | £24 |
| Halifax | 29.9% | £101 | £3,649.32 | £59 |
| HSBC | 21.9% | £92.87 | £3,343.23 | £23 |
| Santander | 20.3% | £91.17 | £3,282.12 | £40 |
| M&S Bank | 18.6% | £89.35 | £3,216.60 | £19 |
| First Direct | 13.9% | £84.38 | £3,037.72 | £14 |
| Sainsbury’s | 18.4% | £89.14 | £3,209.04 | £37 |
| RBS | 22.9% | £93.93 | £3,381.48 | £45 |
| Nationwide | 14.9% | £85.41 | £3,074.76 | £30 |
It seems British borrowers are also confused over the small print associated with taking out a bank loan. When it comes to paying off a loan early, only half (48%) of Brits are aware that the bank would penalise them for early repayment – and an eighth (14%) believe the bank would actually reward them for this.
James Benamor, CEO of Amigo Loans, commented:
Banks are lying to their customers and duping them by advertising rates that only a few people will actually get. On top of this they load on hidden fees, charges and hard-sell ancillary products to boost their profits. While many people are denied a bank loan by a cutthroat credit score, those who are successful are ultimately borrowing at much higher rates than expected.
We urge anyone looking for a personal loan to explore the whole market to make sure they find the right lender for them, and read the small print to make sure they get the best deal and understand the terms or they will end up paying a lot more than they want to. We purposely designed our loan product to be honest so that everyone gets the same rate with zero fees or charges or penalties - what you see is what you actually get; something the banks should try.
Notes to editors:
- Based on example bank loan of £2,500 taken out over 36 months
- Consumer research carried out between 30th May - 2nd June 2014 by Opinium Research amongst 2,004 UK adults. Responses to levels of APR based on a bank loan of £2500 taken out over 36 months.
- Desk research conducted by Opinium Research between April and May 2014 into the representative APR’s on bank loans offered by popular high street banks(based on a £2,500 taken out over 36 months). Information was obtained online through terms and conditions on the respective bank’s website and via telephone with their call handlers.
