New research from LiveLend has revealed that more than one in four (26%) people who took out a loan in the last five years were stung by extra costs they’d not noticed.
The research showed that most consumers are most likely to be caught out by fees for ‘same day money’ followed by missed or late payments. Other borrowers are tripped up by early repayment charges, which often apply to people who are trying to be sensible by paying their loan off early. However, four in five (79%) say the charges were not made clear at the point of sale.
Additional market analysis shows that 91 per cent of major banks and loan providers charge these additional fees, which are often not made clear to consumers and the amounts can vary dramatically between providers.
For example, early repayment fees, which are charged by two-thirds (66%) of providers, range between 28 days interest and 58 days interest. On a loan of £10,000 with an APR of 25 per cent, this could be anywhere between £172 and £358 depending on the provider.
In total, loan companies and banks have made £164 million from these unsuspecting customers over the last five years, but even those who aren’t ‘caught out’ by these extra fees think it’s unfair that they’re so often buried in the small print.
The vast majority (85%) believe that loan companies should be more upfront about their charges, while nearly three in four (72%) say providers take advantage of customers’ apathy to make money from extra fees.
Julia McColl, Head of Customer at Livelend, said “Even though fees are charged by the majority of providers, 2.6 million consumers are caught out by them, which implies that there’s a serious issue with providers’ levels of transparency and clarity. ”