UK consumers need educating when it comes to taking out loans

Every year millions of people in the UK take out a loan for one of a range of purposes, with consumers opting for both secured and unsecured loans, which are available from a wide variety of lenders. However, according to recent research many of these consumers are unaware of what to look for when selecting a loan, and as a result of this borrowers in the UK could be wasting millions of pounds each year on their borrowing. In fact, according to the study, which was recently carried out by the Alliance and Leicester, around a quarter of a billion pounds could be wasted each year by borrowers that do not really understand loans.

According to the survey it is not only lack of understanding about APR (Annual Percentage Rates) and other borrowing terms that is contributing to the huge losses for consumers, but also an apathetic attitude from many borrowers who could easily switch to a cheaper and more cost effective deal but simply put it on the back burner and continue paying more expensive finance. The study suggests that a borrower could save hundreds or even thousands of pounds over the term of their loan simply by switching to a deal that offers better value for money.

One Alliance and Leicester spokesperson stated: "We have known for a while that the big high street banks do not tend to offer the best deals, whether it is on current accounts, mortgages or personal loans. This research shows the staggering amount that people are overpaying for uncompetitive personal loans, and how much the big high street banks rely on borrower apathy and lack of financial understanding."

He also stated: "With many more people starting to feel the pinch and tighten their belts, a good first step is to look around for a good personal loan. It might only take five minutes, and could save you a hundreds of pounds. If you already have a personal loan, it can be worthwhile to switch your loan to a cheaper lender."