Small borrowers make big spends

The majority of lenders will offer lower rates on larger sums of money, with some tripling rates for those borrowing smaller amounts.

Lisa Taylor, an analyst with Moneyfacts, the financial comparison company, said: “Almost all personal loan providers have adopted a tier-based pricing structure, offering lower rates for larger advances.”

For example, Marks & Spencer Money offers an annual percentage rate (APR) of 19.9 per cent for loans between £1,000 and £2,999, compared to a rate of 6.4 per cent for loans over £10,000.

Meanwhile, the industry says the tier system is in place because higher-risk borrowers tend to go for smaller amounts.

Ms Taylor concluded: “Surely this should be reflected in the bank’s original lending criteria and credit scoring process and should not apply to all borrowers.”