Data from Experian finds that over 10 million people who hold a credit card with interest may be able to save “£1,391.69 in interest payments” annually by switching their existing balances to a balance transfer card (BT card) with a better deal.
Experian’s data reveals that on average consumers hold a balance of “£3,109, so a customer carrying this balance on a card with the Bank of England (BoE) average APR of 21.4% and making monthly payments of £100 could save over £1391.69 in interest payments by transferring their balance to a 29-month 0% BT card.”
Depending on the balance a customer is carrying on their credit card, if they opt to “take out a debt consolidation loan they could make considerable savings in interest payments.”
For example, £7,500 is the average amount people “apply for a debt consolidation loan.”
A customer carrying a balance of “£7,500 on a credit card with interest and the average BoE APR of 21.54% and paying the minimum payment of 3.5% would take 38 years and 10 months to clear the balance, which would cost them £13,390 in interest.”
However, a five-year personal loan taken out via Experian’s credit comparison marketplace for “£7,500 with a representative APR of 5.9% would result in a monthly payment of £144.11 and total interest payable of £1,146.6 – resulting in a potential saving of up to £12,243.40.”
This significant potential saving underscores the “importance of effective debt management strategies, especially after the financial strain of the festive period.”
The money platform has reported that “pre-approved eligibility for debt consolidation products has seen an overall increase of 9% on Experian’s credit comparison marketplace from January to December.”
For those in the lowest score band their pre-approved eligibility “has increased by 21%, meaning that those most impacted by the tightening lending environment now have increased access to credit options.”
John Webb, Consumer Affairs Expert at Experian UK&I, said:
“As people start to financially plan for the year ahead, now is one of the best times to explore the options available for managing debt. Lenders often introduce a variety of new deals, such as longer balance transfer or purchase durations. Our latest data reveals that switching to a balance transfer card or consolidating debt could lead to significant savings.”
Consumers looking to better their finances this month could “benefit from brand new and longer deals available, such as with the top three longest 0% balance transfer deals currently available on Experian’s credit comparison marketplace, including Barclaycard 31 months, MBNA 30 months, and Lloyds, Virgin and Tesco 29 months.”
This analysis comes after the money platform announced that it has “added Paylink’s ReFi solution to its credit comparison marketplace.”
ReFi settles customers’ existing debts directly with lenders through a streamlined process, as it “repays debts such as credit cards, personal loans, store cards, and overdrafts by consolidating them into a new loan with better terms.”
This approach simplifies managing payments for consumers and helps solve the issue of ‘double counting’ of affordability as consumers are “assessed only on their existing debt – potentially streamlining and reducing their repayments.”