Money Saving Expert Martin Lewis says there are ‘three steps’ to cut existing loan costs which nobody knows about.
The financial guru, speaking on the latest episode of The Martin Lewis Money Show Live on ITV1, let his viewers in on a little-known method to cut the cost of your existing loans.
Many millions of people use personal loans to buy a car, make home improvements, or pay for repairs.
Speaking on Martin’s show, co-host Jeanette Kwayke said: “I didn’t even know you could do that,” to which Martin replied: “Nobody does, which is why I haven’t had any questions on it.”
Martin Lewis then told his viewers: “You can cut the cost of existing loans, but the first easy question is, have you found a loan for the amount you’re currently borrowing with a lower APR?
“If there isn’t, you can’t do this at all.
“But even if there is, it isn’t necessarily cheaper.
“Now where this becomes a real powerhouse is where your credit worthiness, your credit score – it’s not really that but we’ll call it that – has improved since the original loan so you might be able to get a cheaper loan now.
“But also the cheapest loan rates have come down in the last six months so it may be advantageous.
“So this is a three-step [process].”
Martin then added that people who need to go over it again can rewind and watch the show again, which is still available on ITVX.
He continued: “The first thing you want to do is ask your current lender for an early settlement figure; if I paid you off today, including the early repayment penalties that many loans have, how much would it cost me?
“£3,000, let’s say, you write that down. Now you need to find the cheapest borrowing for the settlement figure. Don’t just apply, use an eligibility calculator.”
Martin then said: “Once you know how much you’re gonna pay, then what you need to do is say ‘is the new loan cheaper than your current loan?
“So you’re gonna work out, if I keep repaying my current loan, I’ve got 24 months at £200, 24 times £200, that’s how much it’s gonna cost me for the rest of the term. Which is cheaper, that, or the cost of the new loan?
“If the new loan’s cheaper, switch, if it isn’t, stick on your existing loan.”
