Monday, February 04, 2008
Rates in the unsecured loan market are on the decrease and borrowers could make big savings by switching loans mid-term.
However many of us fail to do this because we believe the savings are too small, that it would be too much hassle, or that switching a loan mid-term is impossible.
However given the fall in rates among major providers - including Alliance & Leicester, Moneyback, Lloyds TSB, Barclays and Sainsbury's - since the Bank of England cut base rate in December, consumers could save up to £830 over five years on a typical £8,000 loan by making the move, according to research by price comparison website uSwitch.com.
The actual cost of switching is low, with one in four lenders not charging and 67% charging an early repayment penalty of one month's interest or around £39.
This is small in comparison to the £166 annual saving consumers could pocket by opting for a more competitive deal. This is based on the difference between the 6.5% offer from Sainsbury's compared to the 10.9% average on a loan of £8,000 over five years.
Mike Naylor, personal finance expert at uSwitch.com, said: 'In such a volatile unsecured personal loan market, five years is a long time to stick with the same provider as rates fluctuate constantly.
'With more base rate decreases predicted over the next 12 months it's possible we may see other providers following this example by offering more competitive deals than those available last year.'
Shopping around for a personal loan has become more difficult as a growing number of providers begin to operate personal pricing, based on an indivdual's financial history.
Mr Naylor continues: 'This new sales tactic provides a personalised rate for each loan applicant and no longer allows consumers to compare competitive APRs as they are not advertised. While they still can, consumers should give loan providers the wake-up call they need and move their business elsewhere if better deals become available.'
The best-buy unsecured loan on the market at the moment is from Lloyds TSB (for existing customers only) at 6.4% for £10,000, compared to an average loan rate of 10.9%.
After Lloyds, the next best unsecured rate for a £10,000 loan repaid over five years is provided by Sainbury's via the internet at 6.5%, then Moneyback Bank at 6.7%, AA Internet 6.8% and Barclaycard and Tesco both at 6.8%.
You can easily switch your loan mid-term. All you need to do is contact your lender first to find out how much it will cost you to pay off your loan early. Then compare this to the cost of the new loan, taking into account the cost of the settlement figure.
Avoid lenders that offer personal pricing as they do not advertise rates for comparison. Don't just stick with your current account provider, online rates can be more competitive than those offered in-branch.
Source:
http://www.introducertoday.co.uk/News/ |
