Borrow More - it costs less at LLoyds

johnggold

Banks charge higher rates for smaller loans, but they are getting it wrong.

Att Lloyds it costs a total of £7092 to borrow £4500 over 54 months, but only £6526 to borrow £5000 over the same period. If you only need £4500, its over £1000 cheaper!

This is because the banks have thresholds for interest rates, and there are such large gaps between rates, that these anomalies
occur.

I have checked other banks with similar results.

This does not sit well with banks saying they are concerned about ability to pay back - they are just being opportunist with rates for smaller loans.

dotdash79

Or they don't want to deal with smaller loans.

Ant.Evs

All Lenders are the same. This is nothing new:huh:

Darkslider

You'll find the same pattern right up until you get refused because the amount is too high. £7.5k is a threshold where, if you're accepted, you get much better rates than smaller amounts. As long as you've got the discipline it makes sense to borrow more than you need, keep the excess in a separate savings account for a few weeks then pay it back off the loan to give you a head start in clearing it. Obviously ensure you're getting a flexible loan or one where overpayments don't carry huge fees.

poppasmurf_bewdley

johnggold wrote: »

they are just being opportunist with rates for smaller loans.

Strangely, if you buy a large tin of beans, the cost per bean works out less than if you bought a small tin of beans.

The manufacturers must be being opportunistic to those who only need a smaller tin of beans.

It's called trade, and everyone has a choice of shopping around and/or not buying if they choose not to. It's what makes the world go around.

johnggold

I think you missed the point. Taking the can of beans example, it is normal to expect a quantity discount. But in the instance I quoted it is like comparing buying £50 of shopping for £50, compared with getting £60 of shopping for £40.

This is not quantity discounting, it is mathematical nonsense, relying on the unaware not to notice.

Tixy

Remember those are representative rates only. It may not work out for a particular individual that borrowing more is cheaper (or possible).

And equally borrowing £15,000 has a higher representative APR than borrowing £14,999 with the majority of banks.

The banks are entitled to set whatever APR and whatever representative APR they wish.

Your tip is one that is covered on the main site articles - along with a suggestion of repaying the additional amount straight away to further reduce the interest payable.