Save money by switching your loan mid-term
May 21, 2008
According to some industry officials many borrowers that have unsecured personal loans that they are halfway through paying off could actually save money by switching their loan provider and changing to a cheaper deal halfway through the loan term. Many borrowers have avoided this process in the past for one of a number of reasons, such as assuming that their existing lender would impose hefty penalty fees, thinking that the whole process is too much hassle, or not even realising that this could be done.
The results of a recent survey showed that around 30% of borrowers with unsecured loans thought that the process was too much hassle because the savings that could be made would be too small. A further 20% of these borrowers stated that there was too much time and hassle involved in switching no matter what the savings. Around 6% of borrowers were not aware that they could switch to another provider. And many others were under the impression that their existing lender would charge too much if they decided to switch.
According to the report around £140 could be saved by a borrower with an £8000 loan if they switch to a better deal halfway through the loan term. Around a quarter of lenders that offer unsecured loans do not charge any penalty fee at all, so there would be nothing to lose for many of these customers. Another two thirds of these lenders only charge a month’s interest by way of penalty, and even on £8000 this works out to under £40.
One official stated that following the December interest rate cut a number of lenders had reduced their unsecured loan rates, and with further base rate cuts expected this could continue. He said: “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.”
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