2 min read

Beware of iceberg loans

Learn about iceberg loans to avoid paying more interest than expected and make informed borrowing decisions in your financial life.


Have you ever seen an interest rate advertised by a lender and thought it must be too good to be true? This is because it often is.

This article will explain what iceberg loans are and why they are an issue for borrowers. Knowing about this trend is useful if you need to borrow money, so you’re not caught off guard.

What are iceberg loans?

Iceberg loans attract customers with a low ‘headline rate’ advertised by lenders. However, many don’t realise that the advertised ‘headline rate’ only needs to be offered to 51% of customers. The remaining 49% are usually offered a much higher rate. As a result, this forces borrowers to choose – accept the higher rate or explore options elsewhere.

The Times suggests borrowers often pay interest rates up to 10% higher than the advertised rate.

Therefore, it is so important to be aware of iceberg loans. When you need to borrow money, consider your credit profile and personal circumstances. If you think a lender won’t offer a low rate, consider others that may be more realistic.

This helps you avoid an unnecessary ‘hard search’ credit check, which leaves a footprint on your credit report, for a rate you likely wouldn’t get.

What rate will you be charged?

The tricky part is most lenders reveal the actual rate only after conducting a credit check. Credit checks can leave marks on your credit profile, potentially affecting future borrowing attempts.

If your credit score is low, or your personal circumstances do not make you the ideal person to lend to, you will likely be offered a significantly higher rate than what was advertised.

It is very easy to be misled with iceberg loans. If you applied for a debt consolidation loan to clear your existing debt, but were then misled and offered a higher rate, you could end up paying more interest than you were originally.

What you see is what you get

At Serve and Protect, what you see is what you get. There are no hidden fees or early repayment penalties.

If you cannot access the headline rates of banks or building societies, we are here as an ethical  alternative.

Try out our loan calculator to see what you could borrow.


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