The more you borrow the less you pay

Friday, 26 January 2007 12:00

It can be cheaper to take out a large loan than a small one, figures from Find.co.uk show.

This is because many lenders charge lower interest rates for larger loans than they do for small ones, meaning repayments can actually be lower for larger loans in some circumstances.

"Borrowers should take care when choosing the size of loan they want, as a little effort in researching the interest rates charged on different tier levels could save them a considerable amount of money," said Kate Marsden, marketing director of Find.

Most lenders charge their highest interest rates for loans of between £1,000 and £5,000 and loans in the tier above this can be significantly cheaper.

Borrowers can save more than a £1,200 on the repayment costs of a £4,950 loan by taking out £50 more, figures from Find show.

For example, taking a £4,950 loan from Co-operative Bank at current rates would see you pay back £7,178 over five years. However, someone borrowing £5,000 from the same bank would only repay £5,897 over the same period, saving £1,281.

"Borrowers who are not able to research what's on offer, could go for the safe option of choosing one of the providers who charge a standard interest rate across their borrowing range, provided that their rates are competitive," Ms Marsden said.

Providers such as Abbey, First Direct, MBNA Europe, Melton Mowbray building society, Moneyback Bank, Northern Rock, Scarborough building society, Virgin Money and WH Smith all offer a flat rate of borrowing.

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