Consumers can save several hundred euros by shopping around for personal loans, according to a new survey on the cost of credit published today.
The survey conducted by the Irish Financial Services Regulatory Authority (IFSRA) found that on a €10,000 fixed-rate five-year loan, the difference between the least and most expensive loan amounted to over €800.
Borrowing €10,000 from the Bank of Ireland will cost the consumer €2,869.40 over the life of the loan but only €2,050.40 with supermarket Tesco's personal finance scheme or €2,347.29 at the Ulster Bank.
The same loan at a variable rate of interest will cost the consumer €2,748.60 at the Ulster Bank but only €2,338.40 at Permanent TSB.
The total cost of credit on a one-year €2,000 variable rate loan was €250 cheaper at Allied Irish Bank than at CitiFinancial.
IFSRA's Consumer Director, Ms Mary O'Dea said the survey demonstrated the value of taking the time to examine closely the costs of personal loans.
Ms O'Dea said: "Remember you do not have to take a loan out with your current financial institution or take up a pre-approved loan offer if you can get better value or service elsewhere."
She said: "To compare the cost of loans, you should look at the total cost of credit, which shows the total amount you pay to the lender to borrow the money."
Ms O'Dea added: "Regardless of the type of loan you are offered, money can be saved by repaying it over the shortest possible term, as the amount of interest to be paid increases with the term of the loan."
She said: "A €5,000 fixed-rate loan will cost you almost €300 more if you repay it over three years rather than two years."
The survey found that a number of factors influence the cost of a personal loan.
Although some lenders offered lower rates, not all consumers will be offered loans by all lenders in the market. Personal credit histories are taken into account by most lenders and can be accessed through the Irish Credit Bureau.
The survey also found the cost of payment protection on a personal loans varied by as much as €1,000 on a €10,000 fixed rate five-year loan in some cases.
Payment protection on a personal loan covers repayments in certain circumstances, such as redundancy or illness.
