View more on these topics

APR rates could mislead customers

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

Richard Brown, chief executive of Moneynet, says: “Consumers are led to believe that the cheapest loan is the one with the lowest APR. 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 its these extras that earn the loan provider their commission.

Brown adds: “This enables them to advertise what looks like a competitive rate to attract customers. 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 say borrowers should look beyond the APR and ensure they get all the facts before buying.

Brown says: “No-one likes reading the small print but not bothering can mean a loan ends up costing a huge amount more than expected.”

Payment protection insurance can be a lifesaver for those unfortunate enough to need it but can also be a very expensive white elephant if it doesnt pay out. Consumers must understand exactly what they are covered for and the terms of the cover if they are to avoid paying for something which is of no benefit.

Early repayment penalties can also be a sting in the tail. Its natural to only consider the present when applying for a loan the money is needed now but should it be possible in the future to pay the loan off early there will be no saving to be made if the small print demands a penalty.

Brown adds: “These ploys are not confined to a few small-time lenders. Hiding behind the friendly faces of many of the high street institutions is the grim reality of commission-greedy providers lining their own pockets.”


RICS reaction to SIPPS

The Royal Institution of Chartered Surveyors has so far found no evidence of a significant interest in the purchase of residential property within self-invested personal pensions.Chartered surveyors have received only limited enquiries relating to the purchase of residential property within SIPPs.The restriction that will be placed on how SIPPs are run and maintained, and the […]

AIFA unveils survey on the impact of depolarisation

The Association of Independent Financial Advisers announced today that a survey of its members on the initial impact of depolarisation found that the vast majority of business carried out across investments, pensions and mortgages is being transacted on an independent basis. The AIFA / NMG IFA Census survey asked members what type of advice they […]

TBMC announces range of sub-prime mortgages

The Business Mortgage Company, the Cardiff-based commercial and buy-to-let packager, has launched a range of sub-prime buy-to-let mortgages, offering deals with no higher lending charges and flexible criteria.The products, available in conjunction with Rooftop ICMG, are aimed at clients with impaired credit histories. The criteria include ignoring defaults, no paper proof of employment status for […]

HBOS in crisis: First Commentary

The dramatic but expected departure of Michael Bolton from HBOS has sent the specialist lending market into a spin.Bolton quit the organisation yesterday morning to join The Oakwood Group, a London-based private equity firm fronted by Future Mortgages founder Mike Culhane, immediately taking with him four other key players: Alan Cleary, director of sales at […]

Simon Fletcher

Auto-enrolment: pay attention or pay the price

By Simon Fletcher

As a chief executive officer of a business in the financial services sector, I have been dealing with the introduction of auto-enrolment for our clients for some time, but I can also speak from an employer’s point of view, having to go through the process ourselves.


News and expert analysis straight to your inbox

Sign up