A new Experian survey indicates that one in six borrowers neglect to compare multiple loan offers, potentially losing hundreds of pounds due to small differences in APR over the loan term. Experts advise careful comparison to maximise savings and manage costs effectively.
A new Experian survey suggests many borrowers are still leaving money on the table when they take out personal loans: one in six said they did not compare more than one offer the last time they considered borrowing. That can be an expensive shortcut, because even small differences in annual percentage rate, or APR, can add up to hundreds of pounds in extra interest over the life of a loan. According to Experian, the gap between the lowest available APR and the middle offer on a 36-month loan was enough to produce meaningful savings for borrowers across credit tiers.
Christina Roman, senior manager of consumer education and advocacy at Experian, said borrowers often want a quick fix when they are facing debt, an emergency bill or a major purchase. In that situation, the first offer that looks workable can feel good enough. But Experian’s analysis showed that on a $15,000 loan over three years, a 2.5 percentage point difference in APR could mean $651 more in interest, even though the monthly payment changed by only $18.
The lesson, consumer finance experts say, is to compare offers on the same terms. APR is a better comparison point than the interest rate alone because it includes certain lender fees, while the advertised rate may not reflect the total cost of borrowing. Experian’s UK guidance says personal APR is the rate an individual is actually offered, based on creditworthiness, while representative APR is only the headline rate shown to most successful applicants.
Borrowers should also watch for fees that may not be obvious at first glance. Origination charges, which can be deducted from the amount borrowed, may take a noticeable bite out of the funds received, and late fees can apply if payments are missed. Matt Tomko, chief revenue officer at Happy Money, said the key is not just the starting rate or the monthly instalment but the total cost over the full term.
Personal loans are typically fixed-rate instalment loans, meaning the payment stays the same for the life of the loan. That predictability can help with budgeting, and Experian says well-managed personal loans can support credit health by building payment history and reducing credit-card use. But a longer repayment period can also make the loan more expensive overall, so shoppers should weigh affordability against the amount of interest they will ultimately pay.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
