Getting a loan? Why borrowing just £1 more can often save you money


Here is a nice quick tip for you, that shows that sometimes borrowing more can actually be cheaper than borrowing less.

The interest rate that you pay on a personal loan is generally staggered. The more you borrow, the lower interest rate you pay is the general rule of thumb.

The rate jump thresholds can mean that it is often better to look at how much you are looking to borrow, and see whether going to the next threshold could save you money.

As an example:

Let’s say I wanted to borrow £2,500 over 5 years. I then have a look around and decide I want to go with Sainsburys. I put the £2,500 into their loan calculator and it comes back with an APR of 24.9% – with a total repayable amount of £4,180.80.

£2,500 over 5 years with Sainsburys example

The interest threshold for them is currently £3,000. This means, that if I were to get a loan for £3,000 I could get a reduced interest rate. In this case the APR goes down to 13.9% and the total repayable is £4,103.40.

£3,000 over 5 years with Sainsburys example

So I borrow £500 more, yet it costs me £77.40 LESS in total repayments.

I know I said about it being £1 – so on the same example – if I were to borrow £2,999 (I know you wouldn’t, but still) then you are still paying 24.9% APR – but the total repayment is £5,014.80. This means that borrowing just £1 more will have saved you £911.40 in repayments – a truly shocking amount!

£2,999 over 5 years with Sainsburys example

Borrowing more doesn’t always mean a lower interest rate though, so be careful. Sometimes you can be pushed over a limit which has a higher interest rate.

The next time you are in the market for a loan have a look and see if borrowing more can save you money.


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