A survey by the bank found that many customers agree to pricey payments plans when investing in new home improvements and large items such as a new car or furniture.

According to Alliance & Leicester, consumers could be losing as much £5,300 by failing to take out a loan to pay for major renovations and goods.

Head of personal loans at Alliance & Leicester, Andy Bayes, explained: “Consumers should think as carefully about how they will pay for significant purchases as they do about choosing the goods.

“Retailer credit deals can be one of the most expensive ways to borrow money, so they should be treated with caution.”

Investigation by the bank found that some double glazing companies charge as much as 20 per cent APR, while the average kitchen retailer charges 15.2 per cent APR for a new kitchen.

Of the people polled by the bank, 20 per cent believed that in-store financing plans were the only way they could afford home improvements and major purchases.

Instead, Alliance & Leicester recommends saving thousands of pounds by taking out a low-rate loan to pay for large goods and major renovations.

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