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HighAPR Borrowers Could Save Money by Switching Loans

Responding to new research suggesting that the cumulative interest on personal debt in the UK is approaching the 's163;100bn mark, financial solutions company Think Money (http://www.thinkmoney.com/) have advised borrowers to look carefully at the interest rates they pay on their loans and other forms of credit, and consider whether they could save money by transferring their debts or taking out a debt consolidation loan.

The research, carried out by price comparison site uSwitch.com said that UK borrowers had amassed almost 's163;1.5 trillion in personal debt, and estimated that 's163;98bn is paid in interest each year.

That suggests that the average interest rate for all debt is around 6.7% - although, of course, the interest rates offered to people with differing credit ratings and on different forms of credit varies wildly.

Credit cards, for example, tend to carry upwards of 14% APR - with some considerably higher - while personal loans currently carry around 8%-10% APR for those with strong credit ratings. Authorised overdrafts vary - some are entirely free up to a certain level, some charge a percentage of the overdraft balance each month, and some carry a flat fee for using the overdraft each month.

A loans expert for Think Money said that borrowers should carefully consider the rates they have been offered on loans and other forms of credit, particularly if the APR is high.

It'ss important to remain realistic - borrowers are only likely to be offered the lowest advertised rates if they have a very good credit history - but it often pays to thoroughly research the market before applying for credit. Getting advice from a professional loans adviser can often help people find the best loan deals for their circumstances.

The Think Money spokesperson also emphasised the fact that existing borrowers can often act to reduce the amount of interest they are paying on their debts. Borrowers often fail to realise that switching debts to a lower-APR alternative is a realistic option in some cases. A lower interest rate can potentially offer real savings in the long run.

For some borrowers, the safest way to manage debts more effectively is with a debt consolidation loan. A debt consolidation loan immediately pays off the debts that the borrower chooses to include - meaning they cannot grow any bigger, and the creditors are satisfied. That leaves only one debt to repay, and therefore only one creditor, which many borrowers find to be a more convenient way of managing debt.

Debt consolidation loans can also allow borrowers to spread out their repayments, therefore reducing their monthly outgoings. It is important to remember, though, that repaying debts over a longer period can also mean paying interest for longer. Whilst the impact might be offset, if the borrower is consolidating debts with a higher APR than the new loan it'ss likely to attract more interest in the long run.

Of course, a debt consolidation loan is not for everyone. It may be that another solution is more appropriate, or it might make more sense to transfer smaller debts to an interest-free overdraft, for example. We advise anyone looking to tackle their debts to speak to an expert adviser before deciding what to do.

Think Money specialises in finding loans (http://www.thinkmoney.com/loans/) for people with all kinds of financial backgrounds.

If you are thinking about getting a secured loan - or looking for loan advice - contact one of our expert loan advisers today.

Resources for editors:

Think Money Homepage: http://www.thinkmoney.com/

Think Money Loans site: http://www.thinkmoney.com/loans/

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