I've often suggested ways you can save money by switching to new credit card and mortgage deals, but some research released this week shows that people in debt may benefit by refinancing their personal loan balance.
The report from Sainsbury's Bank claims that about 8.5 million people have an outstanding personal loan, with more than 1.3 million taken out at least three years ago. Back then, of course, interest rates were far more expensive.
For example, if you borrowed £10,000 over five years in July 2010, the best rate available was 7.8 per cent APR if your credit rating was good. However, today it's possible to borrow that at 4.8 per cent APR from Zopa, 4.9 per cent APR from Nationwide Building Society (as long as you're a current account customer of the mutual) and 5.1 per cent APR from Sainsbury's Bank.
As always there are some caveats. For starters, the majority of lenders will charge an early settlement fee for those wishing to pay off their loan early. However, the charge is capped at 56 days' interest, and for the majority of people switching to a lower rate, the savings from a reduced interest rate will more than offset this cost.
It's also important to remember that the interest rate you will pay on a new loan is dependent on your credit rating.
If you want to find out if you can save some money by taking out a replacement personal loan, Sainsbury's Bank has created a calculator on its website which enables you to check the total future costs of your borrowing, and whether it is worth switching to another lender.
Credit card round-up
I was pleased to see the launch of a new credit card comparison website from the UK cards association which can be found at www.cardcosts.org.uk.
This is a really useful resource and something that all credit card holders could benefit from looking at.
It's really simple to use and will help more people appreciate the real cost of borrowing on plastic. When you see the costs in terms of pounds and pence, it's far more powerful as well as more helpful than trying to figure out the difference in APRs. The calculator will also help people realise how much they can save by paying a little bit more off their card balance each month.
As for recent activity in the credit card market, there are a few new products worth a mention.
First there's the new Fluid credit card offering 0 per cent for 16 months on purchases and 0 per cent for 14 months on balance transfers (subject to a one-off balance transfer fee of 2.9 per cent).
It's a good all-rounder, plus there's a very handy "pre apply" facility online so you know upfront if you're likely to be accepted or not without making a footprint on your credit record. It's a shame that more providers don't offer this option rather than letting someone spend 10-20 minutes ploughing through an application only for them to be declined or offered an inferior rate.
Another new card launch for those who are looking to earn something for their spending is the American Express Platinum Cashback Everyday Card.
You can earn 5 per cent cashback during the first three months (up to a maximum £100) and then 0.5 per cent to 1.25 per cent after the promotion, depending on the amount you spend on the card over the year.
For borrowers in search of a long-term balance transfer offer, Tesco Bank and NatWest (Platinum) now both offer 27 months at 0 per cent on balance transfers equalling the long-term market leader, Barclaycard.
Both the NatWest and Tesco BT fees of 3.1 per cent and 3.15 per cent respectively are slightly higher than the Barclaycard deal at 2.99 per cent, but at least offer a fresh option for Barclaycard customers coming to the end of a current 0 per cent deal.
Andrew Hagger is an independent personal finance analyst from moneycomms.co.ukReuse content