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Cahoot Loan

The Cahoot loan is a totally new type of product- halfway between a loan and an overdraft. Fix a credit limit and then borrow what you want, only paying interest on the outstanding balance. It's flexible, it's excellent for unpredictable needs, and it ought to be a facility offered by all banks. If you're remotely astute, check this out.

Cahoot loan examples (correct at publication date, uninsured):

  Monthly Repayment APR
£3000 across 2 years N/A N/A
£5000 across 5 years N/A N/A
£10000 across 7 years N/A N/A

Cahoot, like Egg, is a new breed of bank; existing almost exclusively online, and passing on those benefits to the consumer. But it's not just about technological cost-cutting: products are designed to be cheaper by keeping everything simple.

Rather than taking out a formal loan, the Cahoot loan is rather like an efficient overdraft- once your credit limit is arranged, you can borrow as much or as little as you want, and you'll only pay interest on the amount you use. This is particularly practical if, for example, you're buying a car, and you negotiate a price lower than you had expected. You now don't need to pay interest on the part you bartered down.

Another simplifying factor of the Cahoot loan is that the rate you pay will remain the same however much you borrow- this is great for people who usually borrow only small amounts of money- they are normally penalised by banks and end up paying a high rate. The actual rate you pay depends on your credit limit and credit score (how creditworthy you are) but the majority of customers pay a very competitive 6.8%. In the £1,000-£3,000 range, that's a remarkable deal.

Flexibility also means no fixed monthly repayments- reduce your Cahoot loan payments if you need a break; increase them when times are good. The minimum repayment is 1.75% of the outstanding balance, to a maximum of £50. One small caveat: this flexibility isn't right for everyone. If you're financially undisciplined (not to put too fine a point on it!) you could end up with spiralling debt, and a more rigid repayment schedule might be right for you. But overall, this sort of deal puts the banks well into the shade.