Loans, More for Less - Save £1740 on a £5K Loan - from someone in the business

fosterb

I have been working as a computer programmer in one of the UKs leading internet banks for a long time which unfortunately makes me the enemy. But in order to try to balance out my karma I thought it was about time to pass on a couple of tips, to other moneysavers.

You may or may not know that for some banks there is a change in the interest rate for loans that happens as you increase the loan amount so for example a £4000 loan might be 14.9% apr and a £5000 loan might be 7.9% apr. You can find the point at which the interest rate changes by trying a few values in the loan quote calculator of your chosen bank, but at my place the cutoff is £4999.

If you do some playing around with the numbers you can find some quite amazing differences that I'm sure most people wouldn't know about and the banks don't want to tell you about.

If you took out a loan of £4300 over 5 years you would be paying back at a rate of £125.16 a month, but you might be surprised to know that a loan of £5000 would cost you almost the same, at £125.81 a month!!! That is a free £700 you could be getting just by spending a few minutes playing around with the numbers.

Alternatively if you borrowed £4999 (unlikely but I'm just proving a point) it would cost you £145.51 a month over 5 years, but a loan of £5000 would only cost you £125.81, a saving of £19.70 a month which is a massive £1182 over the term of the loan. Or again, to look at it yet another way if you paid £145.72 a month for a loan of £5000 it would be paid off in 4 years, saving you 1 year of payments which would be an even bigger saving of around £1740!!!

Considering that the vast majority of our loans are in the region of £4000 to £5000 I though this was a point well worth making. More tips to follow!

Martin, I'm a huge fan of this site, keep up the good work!

Mark7799

I recall feom my banking days that because of tiered interest rates it was often cheaper to borrow higher amounts. On more than one occasion I proved to a customer it was cheaper to borrow £7200 than £7000.