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It is the kind of gambit commonly used in grimy, oil-stained garages. You ask the mechanic how much it will cost to have your car tuned. You agree on a price. You come to pick up the car, whip out your wallet and suddenly find the price has mushroomed by 17 percent. Hmmm? "VAT," explains the deadpan grease monkey.

A variation on the theme has been common in banking circles. You ask the bank for a loan. The banker says the interest will be, say, prime plus 2 percent. You say okay.

What you don't know is that you're paying much more for that loan: The price quoted doesn't include various fees. A year ago the regulators forced the banks to be transparent and tell clients about all the fees they will need to pay - interest, commissions, collection fees, the cost of preparing the documents and so on. Suddenly that loan you thought was reasonable turns out to be prohibitively expensive.

Take the "express loan" at Bank Leumi. For three years the bank has been pitching loans via the telephone, or via the ATM, or via any other direct distribution means. No standing in line at the branch, no "document preparation fees." Cute.

The bank's Internet site provides more information about the cost of the loan, depending on your finances and customer status.

For instance: If you borrow NIS 5,000 "express" and repay in three installments, you're charged prime plus 2.5 percent interest. Going by the interest rates at the start of last week, that works out to 8.1 percent for the loan. Sound good? But that isn't the whole story.

Now factor in "compound interest," collection fees of NIS 4.6 per installment, and an "item fee" of NIS 1.21 for each payment. The real cost of the loan works out to 11.2 percent interest.

Won't take a moment

That is an insanely high interest rate, considering that the bank raises sources for the loan at much lower rates. The Bank of Israel lends money to Israeli banks for 3.9 percent, and we the people supply even cheaper sources via our deposits, on which the banks pay only 3 percent.

The difference between the cost to the bank from buying the money and selling it to us ranges from 7 percent to 8 percent. You can find this information on the site, right out there, which doesn't make it any the less scandalous.

What does the bank say? That if we borrowed the money via our local branch, it would cost even more: to borrow NIS 5,000 via the branch, you have to add in a "documents" fee of NIS 60.

Why is the loan so costly? First of all, the spread the banks demand above the 2.5 percent prime rate is not small. Secondly, the cost of the fees compared with the NIS 5,000 is not low either. It raises the effective cost to the client. And thirdly, the shorter the return period, the higher the effective cost.

Conclusion: Stay away from small amounts and short return periods when taking out express loans. They are simply not a good deal.

This is a good moment to mention that one client who recently consulted his bank's Web site did so for informational purposes only, not to take out a loan. But yesterday he discovered that the bank lent him NIS 5,000 - even though he'd only been checking his options and had not asked for the money!

Even if the customer accidentally clicked one time too many, the money seems to have been transferred to his account much too easily. Some customers might like the facility, but the more paranoid among them might suspect that somebody might exploit the unbearable lightness of Leumi's money transfers. And if it is so easy to do, then why-oh-why is it so expensive!

Said customer called his bank and clarified that he had no intention of borrowing the money: He just wanted to price the loan. The bank promised to cancel it. He again tried to run a few figures through the system, to see how the 0.2 percent cut in central bank rates would affect the loan cost.

But lo and behold: The bank advised him that he'd already used his right to an express loan. Dear Leumi, even if he'd already taken a loan, why can't he just run the figures and check the cost?