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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. ( )

“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 £7,000 over five years at 6.5% will cost a reasonable £137.93 per month whilst Nationwide’s 6.7% deal will cost £136.97 - not much to choose between the two – but add on the cost of PPI and the RAC monthly repayments leap to a whopping £189.24 compared to Nationwide’s £158.46. This means that the borrower pays a massive £1,846 extra with the RAC over the term of the agreement.

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 doesn’t 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. It’s 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.

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

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About moneynet ( ) is the UK’s most established personal finance research and data website. The company offers consumers a wide range of low cost financial products: from mortgages and personal loans; to car, home and medical insurance; credit cards; savings accounts and best-buy fixed rate products. is an ethical, impartial and comprehensive source of consumer finance information, covering the whole of the personal finance sector.

Moneynet was founded in 1997 by Chief Executive Richard Brown to simplify the personal finance market and provide consumers with impartial and interactive information on financial products and services.

Press and consumer enquiries:


Contact: Richard Brown, Chief Executive
Telephone: 0208 313 9030

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Contact: Rachel Lane
Telephone: 0131 561 2251


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