Don’t fall for the loan arranger’s patter
Nearly two-thirds of us are reluctant borrowers and try to avoid being in debt as much as possible, according Alliance & Leicester.
But what does that say about the other third?
And the news just gets worse.
All too often, when we borrow convenience wins over value for money.
For more than four out of ten, A&L says, that means signing up for potentially uncompetitive forecourt finance when buying a car, simply because it seems like an easy and painless way to pay.
And at the shops, five out of ten will happily use store cards for the same reason.
If fact, forecourt finance (unless it’s the interest-free variety) and store cards are generally anything but painless.
Spend £10,000 on a car using a five-year deal at 15.9 per cent annual interest and you would end up paying £14,558.
Use a store card, with a typical rate of 29.9 per cent, to make the same value of purchases, again paying them off over five years, and it would cost a staggering £19,374.
And with a personal loan at a market-leading rate of 6.1 per cent? The total bill would be just £11,627.
Cost-effective borrowing isn’t rocket science.
