Experts at Defaqto have warned that borrowing small amounts of money can often lead to a long struggle to become debt free, because of the relatively large interest rates such deals tend to entail.
According to the research firm, loans that are small in scale will generally fall into a lender’s highest tier in terms of repayment demands.
As a result, the organisation suggests that it cold be in a consumer’s interest to take on one large loan instead of entering a series of smaller borrowing deals of a period of time.
David Black, principal consultant of banking at Defaqto, commented: “Borrowers should take care when choosing the size of loan they want, as a little effort in researching the interest rates charged on different tier levels could save them a considerable amount of money.”
Earlier this week, MoneyFacts.co.uk warned that lenders are likely to charge a sizable fee to anyone aiming to transfer their credit card debts to a different provider over the next few months.