First Direct's new personal loans, which offer a cashback option at the end of the term, "discourage early repayment", according to an expert.
As the cashback deal is only available for borrowers who pay for the full term of the loan, the "typical" customers who repay their personal loans early would not benefit, asserts Nick White, head of personal finance at uSwitch.
However, for borrowers who do not wish to pay the loans off early, the deal offers a "best buy" rate, Mr White states.
If a borrower takes out a £10,000 loan over five years, they can expect to receive £267.86 back at the end of the term, equating to 5.3 per cent APR.
"First Direct has introduced this offer to discourage early repayment and to prove their commitment to loyal customers, by offering them more competitive rates," Mr White remarks.
"Customers thinking about taking out this loan should be realistic about whether or not they will keep the loan for the full term or repay it early."
Mr White recently warned that more than half a million Britons could be overpaying by not shopping around for their loans.
First Direct loans discourage early repayment, expert claims
First Direct loans discourage early repayment, expert claims
Fri, 25 Aug 2006
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