Don't be tempted by cash back loans

With competition rife between the growing number of lenders offering secured and unsecured loans to UK consumers, experts are warning that consumers should be careful not to get duped into taking out a loan because of what might seem like a tempting offer.

One of the main concerns being highlighted by many experts is the cash back loan, which is something that many lenders have started offering in order to tempt consumers to take out loans with them.

According to Moneyfacts experts the cash back offers on loans is a tactic that is being tried by a number of lenders, and consumers are tempted into taking out the loan by the cash back deal, often blinding them to the higher interest rates or other areas of the loan deal that could end up costing them more over the long term.

Consumers were warned that even though the cash back deals may seem tempting there were often loans that did not offer cash back that would work out far cheaper over the long term.

One expert stated: " While the prospect of a cash payment from your loan provider may sound attractive, over the term of the loan, better deals can be found. Opting for a loan with Northern Rock, currently offering a best buy rate of 5.7 per cent you could save £214.03 over the Nationwide BS loan, even when taking the promotional cash back offer into account."

Tom Smith
21.02.07

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External Links:

• Loan information from Direct Gov
• Loan information from Money Made Clear