Clearer loans wanted

Consumers are keen to see more transparency in the personal loans industry, according to a new survey.

08:15 06 May 2004

Consumers are keen to see more transparency in the personal loans industry, according to a new survey.

In 2003, customers took out over 37 billion in personal loans, but according to the survey by Nationwide Building Society, half of people (50 per cent) who currently have a personal loan are unable to explain what a typical rate is.

Typical rates mean that the loan provider must offer the advertised rate to only a proportion of their customers, however many borrowers may be offered a much higher rate.

The survey found that over two thirds (68 per cent) of people who have, or are considering, a personal loan preferred a more transparent approach. They felt a single rate was clear and easy to understand.

Stuart Bernau, Nationwide's executive director, said: "As with so many other financial products our research clearly shows that customers seek simplicity and clarity from financial providers.

"It is no wonder that the public is so confused. It is important for them to realise that an advertised typical rate is not necessarily what they will pay. In many cases it could be substantially more.

"Nationwide believes there is still scope for the new CCA regulations to provide greater clarity for consumers, but the industry itself could also do more if it wants to improve consumer," he added.

Meanwhile 55 per cent of people believed that they would get the advertised rate when they were shown an advertisement quoting a typical rate, yet in reality when a typical rate is advertised the borrower will not know the exact rate they will get until they apply.