The New High Street Bank Personal Loan Cashback Scheme
Almost all of us have either heard or have a credit card that has a cashback loyalty program. How about a personal loan scheme that offers borrowers up to 25% in returned interest if they make their payments on time over the duration of the personal loan? Sound silly? Well, think again, because as of July 2006 UK high street banks began to introduce just such a scheme.
Terms under the newly introduced cashback personal loan scheme almost exactly the same as they previously were. If you want to borrow money from the high street bank, you are required to submit an application form detailing the amount of money you wish to borrow, the term over which you wish to borrow the money for, and the reason why you need the money; for example, to purchase a car. The high street bank will then assess your credit worthiness using some form of credit scoring program and if the loan is agreed you and the bank sign a personal loan agreement. Interest payable on the loan is at the usual high street personal loan rates.
Where this personal loan differs from any that have been available to borrowers in the past is that you will be entitled to a repayment of up to 25% of the interest you paid on the loan at the completion of your repayment. This cashback refund is dependent on only one thing: you continue to make repayments on time and in full and you do not (a) default on any payment during the course of the loan; and (b) that you do not make early repayment of the loan. So long as you can comply with these, the money is yours!
Obviously the new cashback personal loan is going to attract lots of interest. After all, who doesn’t like the idea of ‘free’ money! Nonetheless, before you sign up for a cashback personal loan you should make sure that the terms of the loan meet your needs. For example, keep in mind that the longer you have the loan for, the more chance there is that you’ll default on a payment and then all of the benefits of the scheme will be lost, especially if you have taken out a loan over 5 years and make a default, through no fault of your own necessarily, in year 4. All of sudden you are no longer entitled to the 25% cashback on the personal loan.
It may well be the case that the 25% personal loan cashback is just another gimmick from high street banks who know the chances that most of us will never default in repaying the loan are slim. On the other hand, it could be a gimmick to stimulate the personal loan market in the UK. Either way, if you are a responsible borrower, who always makes their repayment on time, and you are in need of a personal loan at the moment, then the 25% cashback scheme being offered by some of the UK’s leading high street banks may just be the ticket you have been waiting for.
24th July 2006