The rates on personal loans have been rising for a while, but Moneyfacts figures reveal that all personal loan providers in the UK bar two are also charging early redemption charges if borrowers pay loans back early.
According to Moneyfacts, The Post Office and Zopa, the person-to-person online lending marketplace are the only providers to steer clear of ERCs.
Zopa said early repayment fees are bad for borrowers because they discourage borrowers from paying off credit quickly. It also said these fees are often hidden, so surprise borrowers as they attempt to exit the deal.
Early repayment charges are typically an extra cost of one or even two months’ additional interest, adding a significant amount to the overall cost of the loan, said the firm, which isn’t included in the initial rate presented to the customer before they buy.
Giles Andrews, CEO and cofounder of Zopa said: “Zopa has never charged an early repayment fee because we believe it is a nasty, hidden cost designed to protect the provider’s profit margins and discourage people from doing the right thing financially.”
He added: “Even our friends at the Post Office have a clause in their small print that says they can charge such a fee if they want. But the real culprits are the rest of the market that has used the banking crisis as a justification to withdraw a genuinely customer-oriented feature.”
According to Moneyfacts, The Post Office and Zopa, the person-to-person online lending marketplace are the only providers to steer clear of ERCs.
Zopa said early repayment fees are bad for borrowers because they discourage borrowers from paying off credit quickly. It also said these fees are often hidden, so surprise borrowers as they attempt to exit the deal.
Early repayment charges are typically an extra cost of one or even two months’ additional interest, adding a significant amount to the overall cost of the loan, said the firm, which isn’t included in the initial rate presented to the customer before they buy.
Giles Andrews, CEO and cofounder of Zopa said: “Zopa has never charged an early repayment fee because we believe it is a nasty, hidden cost designed to protect the provider’s profit margins and discourage people from doing the right thing financially.”
He added: “Even our friends at the Post Office have a clause in their small print that says they can charge such a fee if they want. But the real culprits are the rest of the market that has used the banking crisis as a justification to withdraw a genuinely customer-oriented feature.”
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