Question about loan APRs

Oakeshott

If the interest rate charged on a big loan is less than that charged on a small loan (as is usually the case with any provider), why not take out the bigger loan and just repay the money you don't need immediately? 

This is the question I'm asking myself. I'm looking for a car loan, but I only need about £4000. However, with the providers I've checked the APR drops significantly at £5000. It feels like there must be a catch, but I can't see why you wouldn't take out the bigger loan and just pay back the bit you don't need. 

DrEskimo

There may be a partial settlement fee to consider, but otherwise no other reason to not do it.

Ebe_Scrooge

Martin Lewis himself advocates just such an approach: https://www.moneysavingexpert.com/loans/cheap-personal-loans/#steps

Within reason yes, it can sometimes work out cheaper to borrow slightly more than you actually need.  As per the previous comment, you do need to watch out for any early/partial redemption penalties, but as long as you do the maths properly, it can sometimes save you money overall.