Switch your loan provider mid-term and save money
Borrowers could save money by switching loan provider mid-term, despite many people thinking such a move is impossible or comes with stinging penalties, research shows.
Some 30 percent of unsecured loan customers surveyed said they would not switch loans because the savings are too small, 20 percent believe it to be too much trouble, and 6 percent think it not possible.
However, a quarter of loan providers allow consumers to switch without penalty and two-thirds charge just one month's interest -- around 39 pounds on an 8,000 pound loan taken over five years at the average interest rate of 10.9 percent -- according to price comparison site uSwitch.com.
Someone borrowing that sum would save 140 pounds in interest if they switched half way through the term to a best-buy rate of 6.8 percent, after taking account of the penalty fee.
Opting for the most competitive deal from the offset would cut the cost of borrowing by 830 pounds over the term.
Eight personal loan providers, including Alliance & Leicester, Moneyback Bank, Lloyds TSB, Barclays and Sainsbury's Bank, have cut their rates since the Bank of England reduced the base rate by 0.25 percent to 5.5 percent in December.
The best personal loan deals on the market, based on a 10,000 pound loan over five years without insurance, currently include Sainsbury's Bank at 6.5 percent, Moneyback Bank at 6.7 percent, Tesco Personal Finance at 6.8 percent and Barclaycard at 6.8 percent, according to data from price comparison site Moneyfacts.co.uk.
"With more base rate decreases predicted over the next 12 months, it's possible that we may see other providers following this example and offer more competitive deals than those available last year," said Mike Naylor, personal finance analyst at uSwitch.com.
"In such a volatile unsecured personal loan market, five years is a long time to stick with the same provider, as rates fluctuate constantly."
In the second half of last year, more than 30 providers increased their unsecured personal loan rates by around 1 percent, he added.
By Jennifer Hill LONDON (Reuters)
Source
http://uk.reuters.com/article/personalFinanceNews/idUKGRI53091920080125 |
