The research has revealed that the actual cost of switching is low, with one in four lenders not charging anything and 67% charging a typical early repayment penalty of one month’s interest or around GBP39. This fee is small, particularly when compared to the GBP166 a year consumers could save by opting for a more competitive deal from the offset.
Further analysis showed that both confusion and apathy are holding consumers back from making major savings on their existing loan. 2.5 million people think the savings from switching a loan mid-term are too small. It has also showed that 1.6 million loan customers said it’s too much hassle and the most the discouraging news is that 14% wouldn’t even consider doing it. An additional 6% think it it’s impossible to switch a loan mid-term. However, 4.5 million people didn’t know how much interest they would pay on a GBP10,000 loan over five years at an APR of 6.9%, so it’s no great surprise that people are lost in this web of confusion.
Mike Naylor, personal finance expert at uSwitch.com, commented: In such a volatile unsecured personal loan market, five years is a long time to sick with the same provider as rates fluctuate constantly. For example, in the second half of 2007, more than 30 providers increased loan rates by around 1% APR.
