Credit, Collections & Insolvency News
The impact of the Coronavirus on the lives of consumers may lead them to consider consolidating loans to pay off debt leading to a healthier financial situation. according to analysis by Moneyfacts.co.uk
The company says that despite a drop in base rate by the Bank of England, interest rates on unsecured personal loans are starting to increase, which may lead consumers to consider the cost to consolidate debts.
Rachel Springall, Finance Expert at Moneyfacts.co.uk, said “Unsecured personal loans are an ideal way for consumers to consolidate multiple credit card debts into one neat repayment package, plus, unlike a credit card, loans provide a fixed regular payment structure and a clear date of when the debt will be paid off.”
“Credit cards are a lot more flexible, and can provide a 0% introductory offer for consumers who want to prioritise paying off their accumulated debt, such as with balance transfer credit cards. However, their flexibility can also be a double-edged sword, as consumers could easily drop to paying just the minimum repayment and make little dent into settling their debt.”
“Lenders adjust their loan pricing in reaction to the changing market, so if they feel lending money out in the current environment is riskier, they can increase rates or pull out of the market entirely. This movement would echo what was seen in the aftermath of the financial crash. Indeed, since the start of March 2020, besavvi, Admiral and Ikano Bank have pulled their loans to new customers.”
“As it stands, the best loan rates remain on offer away from the biggest high street brands for new customers, however, it is worth pointing out that the APRs advertised are only offered to 51% of successful applicants. With this in mind, it would be wise for potential applicants to check their credit score before they apply, such as with Experian, to check any anomalies and ensure they are in the best possible position before they apply for any loan.”