Borrowers could save £1.25bn
Unsecured personal loan customers could save £1.25bn in interest by switching to a more competitive deal halfway through the term, according to uSwitch.
The price comparison site and switching service found that on average, borrowers with an £8,000 loan spread over five years could save £180 by switching to a best buy deal half way through – amounting to a total of £1.25bn in savings.
According to uSwitch, not everyone is willing to switch their deal, however. According to the research, 2.5m unsecured loan customers said they wouldn’t switch loans because the savings were too small, while 6% just didn’t think it was possible to switch to a different loan provider. One-in-four loan providers allow consumers to switch loans without any penalty and 67% charge one month’s interest, which is normally around £39.
Mike Naylor, spokesperson for 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. In the second half of 2007, more than 30 providers increased loan rates by around 1% APR. However, since the last base rate cut at the beginning of December, eight major lenders including Alliance & Leicester, Moneyback, Lloyds TSB, Barclays and Sainsbury’s have already cut their rates by up to 5.5% APR. With more base rate decreases predicted over the next 12 months it’s possible that we may see other providers following this example and offering more competitive deals than those available last year.”