HSBC personal loan cashback a phantom offer, expert claims

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Thu, 06 Jul 2006

HSBC's new personal loan, which offers users 25 per cent of the interest back after completion, could be a "phantom offer" for many borrowers, an expert claims.

As a typical borrower is likely to pay off the personal loan before the end of the term, many users stand not to benefit from the cashback offer, claims uSwitch.

Also, a customer who repaid the personal loan early would receive 59 days interest to pay.

Nick White, head of personal finance at uSwitch, commented: "It seems clear that HSBC’s rationale for introducing this novel offer is to discourage early repayment and offer loyal customers better rates.

However, he states that UK borrowers wishing to take out the personal loan should think about whether they are set to benefit from the end-of-term rebate, or whether they would be better off with a different personal loan which offers a lower standard rate and lower early settlement fees.

"There are currently 15 loans with sub six per cent interest, including MoneyBack Bank and Direct Line leading the way with a typical APR of 5.6 per cent, all of which will charge a standard one month’s interest if they choose to repay early," adds Mr White.

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