Moneynet Cautions Borrowers Not To Be Seduced By Attractive APR
Hiding The Full Costs Of A Loan
* Low APRs draw in borrowers - but PPI pushes up repayments
* Read the small print, cautions Moneynet
Relying solely on advertised APR rates to choose the best deal
on a loan could mislead borrowers into picking the most
expensive product on the market rather than the cheapest, warns
online financial data comparison site Moneynet. ( http://www.moneynet.co.uk )
"Consumers are led to believe that the cheapest loan is the one
with the lowest APR," said Moneynet Chief Executive Richard
Brown. "But this is far from the truth - borrowers should be
aware that a loan package does not always do what it says on the
tin."
The reason for this is that the APR simply reflects the cost of
the credit without taking into account the cost of other add-ons
such as payment protection insurance and early repayment
penalties - and it's these extras that earn the loan provider
their commission.
"This enables them to advertise what looks like a competitive
rate to attract customers," said Brown. "Then once the applicant
is convinced they have found a great deal the commission-hungry
provider will make every attempt to sell them PPI, thus
increasing their margin via the back door."
Moneynet's message is clear - borrowers should look beyond the
APR and ensure they get all the facts before buying.
"No-one likes reading the small print but not bothering can mean
a loan ends up costing a huge amount more than expected," added
Brown.
For example, a loan from the RAC of