Research from TSB has revealed that at least 59,000 British adults who have a least one interest bearing debt are paying more than they need to by not moving to a better deal, whether that be another credit card or unsecured loans. Brits are paying as much as £664 million in total per year extra or approximately £1,134 per person.
As many as 5 million Brits owe between £5,000-£25,000, yet almost half of these are eligible for a much lower rate unsecured loan to consolidate their debts. This potential failure to consolidate, means that Brits overpay by £55 million every month to satisfy credit.
The research confirmed further, that whilst 13% of borrowers are unaware of their options, 49.9% just bury their heads in the sand and avoid thinking about debt. The ‘Ostrich Effect’ means that these individuals on average pay £200 more than those who shop around. Indeed they also pay on average a higher rate of interest of 14%APR compared to around 10% for those that change products.
35% of borrowers were also identified as ‘pessimist’ debtors. They strongly believe that it is a waste of time and effort to shop around as they simply will not get a better deal. However, in reality they have just as much chance as anyone else and so again end up paying more than is necessary.
Nick Smith head of Loans at TSB said; “There are times when we all need a little extra financial support, whether it’s to clear more expensive debts, pay bills, make some much needed home improvements or replace an old car. The consumer credit industry offers people a helping hand when they need it most, but it is important that people know all of the options available to them to find the best deal for their needs and be able to borrow well.
“However, our research shows that people shouldn’t stop shopping around for better deals even after they have committed to borrow. We urge people to continue to take just 30 minutes out on a regular basis to review their debts as they may be one of the half a million Brits eligible to refinance to a cheaper deal, and pay less for their debts, which will help them become debt-free sooner. Burying your head in the sand about debt won’t make it go away – and it can end up costing a lot more than you bargained for. We encourage borrowers to understand how much they are paying and for how long so they can consider their options.”
So if you’ve got a credit card, store card or an unsecured loan, it is always worth checking to see if there are any cheaper deals. Consolidating can often be a more cost effective and quicker way to become debt free, and unsecured personal loan rates are at the most competitive they have ever been. Even for those with less than perfect credit can obtain a bad credit loan, the range of products is improving all the time as lenders aim to be flexible when meeting your financial needs.