MoneySavingExpert fan saves nearly £ 4,000 by converting loans

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A MONEYSAVINGEXPERT fan saved nearly £ 4,000 by switching to a cheaper loan to pay off his debt.

The fan named Nicola said she saved £ 3,788 with the move – and as a single mother, she said it was a “massive” amount to save.

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You could potentially save thousands by switching your loan – but you should be aware of the pros and consPhoto credit: Getty

It was featured in MoneySavingExpert’s weekly newsletter, which outlined how others could potentially save thousands by exchanging loans.

If you have taken out a loan, it is worth researching whether you can take out a new, cheaper loan and use it to pay off your existing one.

This is because the UK’s low interest rates are low – up to 2.8%, MoneySavingExpert said – and lenders compete to offer their customers the best deals.

This means that you can swap your loan, which you may have taken on at higher interest rates, for a new loan with lower repayment rates – which could save you money in the long run.

First, you’ll need to call your lender about a settlement fee – that’s the amount of money you’ll need to pay to pay off your loan.

It might include an early settlement fee that you have to pay because you are paying off your debt early – this can take up to two months in interest repayments.

Then you can find a new loan with a cheaper interest rate to pay off your old loan – we have listed the best interest rates below.

To check whether you are eligible for the desired loan, MoneySavingExpert offers an authorization calculator that you can use to check whether you can make an application.

If you are eligible, you can use the loan exchange calculator to see how much you could save by switching.

If you can save money on the interest repayment by switching, it makes sense to apply for the new loan.

What are the best prices?

When The Sun compared Uswitch’s rates on three-year loans, Cahoot and M&S Bank offer the cheapest rate of 2.8% APR on loans over £ 7,500.

Tesco Bank offers the best interest rates on loans from £ 5,000 to £ 7,499 at 3.4%, while AA’s rate for members is best on loans from £ 3,000 to £ 4,999 at 8.2%, otherwise it is the Post with 8.3%.

For smaller loans, the Santander, Cahoot and Tesco rate is the cheapest at 13.5% – but MoneySavingExpert said a wire transfer credit card loan is likely cheaper.

This will allow you to switch your debt to a 0% credit transfer card – which means you won’t have to pay interest on the loan for a period of time.

Note, however, that top rates are only available to those with very good credit scores.

If your rating isn’t that good, chances are you won’t get such a good deal – make sure you do the math to see if it’s worth switching.

You can also check out other comparison websites like Money.co.uk, Comparethemarket and MoneySuperMarket to compare prices too.

What are the pros and cons of switching?

While switching can be a great way to save money on paying off your debt, you should be aware of the cost.

James Andrews, managing editor for personal finance at Money.co.uk, said consolidating existing debt into a cheaper loan can be a great way to save some money, but the British should “be careful about how you deal with it”.

He said, “You will almost certainly have to pay an early repayment fee.

“Make sure you take this into account when trying to figure out whether or not a new deal is cheaper.

“You also need to take out a new loan that is large enough to cover both the cost of repaying the old loan and all fees.”

Moneyfacts financial expert Rachel Springall said you should also check your credit report before applying for a new loan.

“Borrowers should check their credit reports and make sure everything is correct. If there is any discrepancy, be sure to contact the credit reporting agency,” she said.

StepChange’s Sue Anderson warned against consolidating your debt as well.

“If you have a bad credit history, you are more likely to be offered consolidation loans with higher interest rates,” she said.

“If so, consolidation loans may not be your best option.”

For example, one savvy saver paid off her £ 32,000 debt – and it almost deterred her from buying a home.

Here are 20 money saving hacks that could make you hundreds of pounds richer.

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