Early-repayment charges on personal loans are working against attempts to reduce the UK’s debt mountain and should be outlawed, loan-provider Zopa has said.
The website, which connects people who wish to borrow money with people who wish to lend, described the charges as a “healthy disincentive” to clearing debt.
It added that the fact that many low-cost lenders could afford to waive the charges was proof that they were not required to make lending economical or efficient.
“Early repayment penalties are a classic example of self-serving sharp practice by the financial services industry,” said Zopa spokesman James Alexander.
“[They are] designed to protect and increase profits at the expense of encouraging customers to do the right thing with their money.”
The personal debt mountain currently stands at over £1 trillion on credit cards and homeowner loans secured against property, ten per cent up on 2005.
Zopa said that when considered in relation to pension policy there is a clear case for outlawing the charges as they are causing vast expenditure just to service debts.
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