The Irish Financial Services Regulatory Authority (IFSRA) has published its first survey of the personal loan market, revealing that consumers can save more than €800 on a loan of €10,000 by seeking out the cheapest lender.

However, the financial watchdog has reminded consumers that their ability to secure the best value loans may be hampered if they have a less than spotless credit history.

IFSRA also warns consumers to consider whether or not a personal loan is really the best option for them.

"If you need a relatively small amount of money, you may be better off saving in advance or considering a short-term overdraft," the regulator said.

IFSRA has previously cautioned against the "buy now, pay later" approach of frivolous borrowing, recommending that the first question consumers should ask themselves before getting into debt should be "do I really need a loan?".

Its independent guide to personal loans and credit contains the warning that "waiting until you can afford to pay for what you want is painless compared with finding yourself trapped with a loan you cannot afford to repay".

IFSRA's consumer director Ms Mary O'Dea said yesterday that consumers should look at the total cost of credit before deciding on which lender to choose, rather than simply concentrating on the monthly repayment amount.

"Regardless of the type of loan you are offered, money can be saved by repaying it over the shortest possible term," Ms O'Dea said. A €5,000 fixed-rate loan can cost almost €300 more if it is repaid over three years rather than two, she added.

IFSRA found that a €10,000 loan over a five-year term would cost a consumer €819 extra if they took it out at a fixed rate of 10.9 per cent at Bank of Ireland than if they opted for Tesco Personal Finance's fixed rate of 7.9 per cent.

Tesco was also the cheapest for a €6,000 loan to be repaid over a three-year term. The total cost of credit arrived at €822.90 at Tesco compared to €1,167.60 at GE Capital Woodchester, which provides many of the credit deals offered by garages and electrical goods shops.

Even on a €2,000 loan over a one-year term, the cost of fixed-rate credit varied by more than €80, with AIB proving to be the cheapest.

Apart from the CitiFinancial group, which markets its high interest rate loans to higher risk borrowers who can't get credit elsewhere, IFSRA found that Bank of Ireland was the most expensive for personal loans in the €10,000 category.

IFSRA said the rates used in its survey are those generally available to at least 50 per cent of normal applicants and not subject to ownership of another product.

This excludes the lowest advertised rates by Ulster Bank and One Direct, but it also ignores the cheaper rates offered by Bank of Ireland through its online and telephone banking channels.

IFSRA cautioned that not all consumers would be offered loans by all lenders in the market.

A person's credit history, which is stored in a central database at the Irish Credit Bureau, can be accessed by all lenders and will be taken into account before the lender decides whether or not to offer them the loan.

Most institutions apply a standard interest rate to all customers. However, some offer different interest rates to different customers depending on their credit history. An individual who missed payments on a previous loan may be charged more in interest than a customer with a perfect credit record.

For example, One Direct's rates vary from 7.75 per cent to as much as 19.9 per cent, depending on individual risk.

Consumers should ask lenders about additional charges such as set-up fees and check if there are penalties for paying off a loan early, IFSRA said.

GE Capital Woodchester and One Direct both charged consumers a set-up fee of €72, the survey found. ACCBank also charged a set-up fee of €63.49 on a loan of €10,000, while Ulster Bank's fees ranged from €25.39 to €100. No other lender charged a set-up fee.

IFSRA warned that payment protection insurance, which is strictly optional for consumers and a lucrative source of profit for lenders, can add a "considerable" sum to the monthly repayments for personal loans.

"People should be aware that lenders often include payment protection in the quote you get for your loan," said Ms O'Dea. "Always ask how much the loan will cost without payment protection," she advised.

The survey revealed that the cost of such insurance, which covers repayments in the event the borrower becomes ill or is made redundant, varies from €503 to €2,078 on a €10,000 loan.

Welcoming the publication of IFSRA's personal loan survey yesterday, the Irish Bankers' Federation (IBF) said it was clear that personal loan rates on offer from high street banks were as competitive as those available from credit unions, if not more so in some cases.

Credit union loan rates, set by individual credit unions, vary from 7.5 per cent APR to a maximum of 12.68 per cent APR.

However, even at the highest possible rates, credit unions are still a good source of credit for higher risk borrowers who may be refused loans by the main banks.

Copies of the survey, its free guide to personal loans and credit, and a fact sheet on credit ratings are available at www.itsyourmoney.ie, by phoning its consumer helpline on lo-call 1890 777 777 or from its information centre at College Green in Dublin.

APR (annual percentage rate)

Use this to compare loans of the same amount and the same term. The APR is the rate of interest you will pay, taking into account all the costs involved over the term of the loan.

Fees and charges

Check out the fees and charges you may have to pay. For example, is there a set up fee or an early repayment fee? What fees apply if you miss a payment?

Total cost of credit

This is the difference between the amount you borrow and the total amount you will have to repay to your lender. It is the best way of comparing different loans and helps you see the extra costs you pay on longer-term loans. To calculate the cost of credit, multiply your monthly or weekly repayments by the number of repayments and add any administration fees applicable. Then subtract from this figure the amount of your original loan.

Beware of loans that encourage you to postpone your debts

Some loans seem very attractive on the surface. They offer you low monthly repayments and encourage you to take out a new loan to pay off all your existing debt. Sometimes you don't have to pay anything back for the first six to 12 months. However, remember that any loan that offers you a lower monthly repayment usually means the loan goes on for longer. This means you pay more interest and the loan is more costly in the long term. Try to reduce your interest charges and pay off your loan earlier than planned. You can do this by paying a little more than the minimum payment each month.

Credit rating

Your credit rating will be affected if you do not keep up repayments. Most lenders report details of loan repayments to the Irish Credit Bureau. A loan application may be refused if you have a poor payment record.