According to a recent study by uSwitch, borrowers in the UK could save upwards of £1 billion by switching their loan to a new lender, before their existing loan term has ended. In fact, the study suggested that borrowers could save an estimated £1.25 billion. This means that, individually, UK borrowers could save as much as £800 in interest charges simply by finding a loan with a lower interest rate.
Many unsecured and secured loans can have terms of five years or more. Personal finance expert at uSwitch, Mike Naylor, said, "five years is a long time to stick with the same provider as rates fluctuate constantly." It's often in the best interest of secured loan borrowers to keep an eye out for lower interest rates during the term of their loan because switching the loan to a new lender or to a different secured loan programme with the same lender could save them hundreds of pounds in interest costs.
During the last six months of 2007, over 30 lenders raised interest rates on their loan products by as much as one percent. With the Bank of England base rate cut that took place in December of last year, eight of the UK's top lenders, including Alliance&Leicester and Barclay's, decided to pass the rate cut on to secured loan borrowers. With more rate cuts predicted in the next 12 months, experts believe that more and more lenders will be cutting their interest rates to stay competitive in the secured loan market. This spirit of competition among lenders will lead to lower interest costs for borrowers.
According to one study, 2.5 million loan holders in the UK won't switch lenders because they believe the effort and time it takes to switch will not be worth it in the end. Another six percent of respondents said that they were unaware that they could transfer their loan to a new lender or to a new programme mid-term. A further 1.6 million people said that switching loans is simply too much hassle.
What borrowers in the UK need to know is that a quarter of lenders allow secured loan transfers, and they allow them with no additional or penalty charges. Another two-thirds of lenders allow secured loan transfers, and they only apply a penalty of one month's interest, which isn't much considering how much you will save in the long run.
Over 60 percent of Britons have transferred their credit card balances from one company to another to save in interest charges, but they are unaccustomed to doing so with their secured loans. Naylor said, "While they still can, consumers should give loan providers the wake-up call they need and move their business elsewhere." As long as secured loan borrowers remain apathetic to the ever-increasing interest rates, lenders will continue to take advantage of the situation by raising rates. While food and gas prices are on the rise and while housing prices are on the decline, it is important for borrowers to cut corners wherever possible, and finding a secured loan with a better interest rate than the one they are currently paying is one way to do so.
When looking for a secured loan with a lower interest rate, it is important to look to lenders other than your current lender. Online secured loan lenders may be able to offer you lower rates that offline lenders because there is a high amount of demand and competition for online loan products. Due to this, online secured loan lenders need to keep their rates low to stay competitive in the online loan market. Use online secured loan comparison tools to find the best loan option for you. Even if you have bad credit, there are still secured loan lenders out there who will be able to accommodate your needs.
If you're interested in finding a secured loan, take a moment to fill out our short secured loan form, and a SimplyFinance representative will contact you shortly to introduce you to a lender who will offer you the best secured loan interest rate for your unique financial situation.