When to switch between finance products

Couple doing finances at home

Here in the UK, many of us lose out on hundreds of pounds each year as we don’t have the confidence to switch between finance products. So, to equip you with the knowledge you need to hunt down and swap to a better deal, we’ve run through six different opportunities to switch finance products and how you could benefit.

1. Transferring a balance

Balance transfer cards can help you avoid paying interest on an amount transferred from another credit card for a set period of time.

For instance, if the card’s introductory offer was 0% interest for 6 months, you could transfer a balance from another card for a small fee and not pay interest on that card for 6 months. This can be a great move if you need a little breathing space with your monthly repayments, or you want to try actively clearing your debt by paying it off in monthly instalments without your debt increasing.

Remember though – when the introductory offer ends, the credit card’s usual interest rate will be applied to the entire remaining balance. That’s why it’s important to make a note of this date and either clear your balance or transfer it to a new card before it comes around.

2. Consolidating your debts

If you’re currently paying interest on loans, credit cards and overdrafts that have a high APR, paying off those debts with a consolidation loan that has a lower APR could save you money.

So, why would you now be eligible for a better deal? Well, if you’ve been paying off a loan or credit card for a while now, you may find your credit score has improved and you’re eligible for a loan with a lower rate.

Also, if you think you may need a little extra wiggle room in your monthly outgoings, you could check if you could spread the cost over a longer period and reduce your monthly repayments. Just be aware that spreading the cost of your debts over a longer period will increase the amount of interest you pay back overall.

If you are thinking of consolidating existing borrowing you should be aware that you may be extending the term of the debt and increasing the total amount you repay.

3. Remortgaging your home

Most of us know we should remortgage before our existing deal comes to an end, but did you know you can remortgage for other reasons too? Top reasons to remortgage aside from replacing your existing deal include:

  • You’re looking to get a better rate
  • The value of your home has increase dramatically
  • You want to switch your type of mortgage
  • You want to borrow more

If you think you’d be eligible for a better rate than when you first took out your mortgage, you can check with a mortgage broker to find out if you’d be better off switching. However, before you move from your existing contract, make sure there are no significant early exit fees or other charges that would outweigh the benefits of switching.

4. Switching from a guarantor loan

If you’ve been paying off a guarantor loan for a while now, you may find that your credit score has improved enough to make you eligible for a personal loan. If you’d rather be financially independent from your guarantor, you could use a personal consolidation loan to pay off your guarantor loan and then continue with your monthly repayments.

Just make sure that you can afford the monthly repayments and that switching is the best move for you.

If you are thinking of consolidating existing borrowing you should be aware that you may be extending the term of the debt and increasing the total amount you repay.

5. Changing your energy supplier

Did you know that if you’re on your energy supplier’s standard variable tariff and you’re making quarterly payments, you could potentially save around £259 a year just by switching your energy supplier?

Once you’ve shopped around and found the right deal for you, all you need to do is let the new supplier know you want to switch to them. They’ll usually take care of the entire switching process for you.

6. Swapping your bank account

Switching your bank or savings account can come with a few quick wins. Switching your savings account to get a better rate can be a smart move as you’ll earn more interest on your savings.

Some banks also offer financial rewards for switching your main current account which can be a quick way to make a bit of cash.

However, if you’re planning on applying for a loan, credit card or mortgage any time soon, having a longstanding record at your current bank can help improve your application. So, if you’re preparing to make a credit application, wait to switch your main current account until after it’s been processed.

Be careful – don’t get caught out by fraudsters

There can be lots of benefits to moving your money around, but always be on the lookout for online fraudsters. Always make sure a finance company is registered with the Financial Conduct Authority (FCA) by checking the FCA Financial Services Register before moving any money.

Not sure of the warning signs? Take a look at our guide to recognising financial fraud.

Being proactive and switching can be a great way to save a bit of cash and make credit work for you. Just make sure you’ve weighed up all your options before making any financial decision.

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