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Revolutionising Personal Finance: Why Refinancing shouldn’t be a dirty word

Picture25554 - Finance Digest │ Financial Literacy │ Financial PlanningIn the realm of personal finance, the phrase “debt consolidation” has often been met with trepidation; conjuring images of hidden pitfalls and plummeting credit ratings. However, with innovative Fintech solutions currently hitting the market, CEO of Paylink, Jake Ranson, says it’s time to challenge both the stigma attached to this financial strategy and unlock the availability of reasonably priced loan products that could help millions of UK customers to regain control over their monthly budgets.

‘Refinancing’. A new approach to Debt Consolidation

Debt consolidation is a troublesome term.  Enter it in a search engine and the customer is greeted with a blend of results. Some, implore them to use legislative schemes like IVA’s or Debt Management Plans to ‘write off’ debt. Others, promote loans. According to Jake Ranson, CEO of Paylink, ‘Refinancing’ is a better way of describing the process of substituting legacy debt for a new loan under more favourable terms. Access to affordable credit can matter enormously with the benefits of refinancing including saving money on interest, budgeting around a single monthly payment, and picking a repayment term that works best for the customer.

There are numerous organisations who can support UK consumers with such consolidation, but few represent both the Lender and the Consumer. Jake says: “ReFi™, a Fintech product from Paylink, piloted by Salary Finance, positively represents both parties by automating the settling of legacy debt with a customer’s new loan. Since its inception in February this year, it has saved UK customers over £10 million in interest.”

Embedded in either a lender or intermediaries’ journey, the digital experience offered by ReFi™ validates the card, loan and overdraft products a customer currently holds, confirms settlement balances, pays legacy creditors directly and, if instructed to do so, evidences when accounts are closed.

Lenders can accept customers who have passed creditworthiness, income sufficiency and stability checks, who would otherwise have been declined for falling short on affordability calculations. By gaining certainty that a new loan will be used to pay off legacy debts, lenders can be assured that the customer’s new budget is affordable for them. As well as heightening the probability of positive outcomes, lenders can offer customers price incentives, reducing the likelihood of fraudulent activity, and building brand advocacy from new customers who have been helped to realise the opportunities that access to affordable credit can bring.

Changing the narrative around debt

Jake emphasises Paylink’s goal is to enable customers to pursue their financial objectives. He says: “Borrowers should be empowered to actively explore opportunities to utilise products that not only ease financial pressure but also open doors to offers and opportunities that may have been obscured by existing debts.”

As Jake highlights, ReFi™ allows lenders to acquire customers with the confidence that their loans will be used for debt consolidation. This not only expands access to credit but also contributes to a more financially secure future for both lenders and borrowers alike.

Refinancing allows customers to tailor a monthly debt repayment plan that aligns with their preferences, consolidating all aspects into one convenient platform, on a single day, and at the lowest possible interest rate available. While the repayment period may extend up to 60 months, and with some lenders, up to 80 months, refinancing in this way doesn’t mean paying more in interest than the actual repayment, a common occurrence with credit cards. It offers customers the flexibility to commit to a reasonable, practical, and timely repayment structure that suits their financial comfort.Top of Form

Today’s climate

As we enter the tail end of a difficult economic year – plagued by soaring energy bills, rising interest rates and inflation, it’s understandable that while reflecting at what is now arguably the most prolific time for seasonal spending, 2024 seems bleak.

While the Office for Budget Responsibility (OBR) is predicting the steepest drop in living standards on record, the UK economy has shown surprising resilience, though this is not the feeling among the British people who are understandably feeling the pinch. Personal debt in the UK was reportedly up by £35.1 billion at the end of August, equating to an average increase of total debt per UK adult of £660.00.[1]

Typically, consumer debt make-up goes beyond simply having outstanding credit card and loan debt. Council tax and energy bills are a growing concern as mortgages remain unaffordable and the cost-of-living crisis continues. Data from UK Finance tells us that 1.6 million mortgage customers will reach the end of their deal in 2024[2], which means that lenders will need to take full advantage of the market’s most advanced financial technology to deliver the right solutions for their customers.

Customers and Lenders alike should approach Refinancing as a positive solution to consumer debt, which is exactly what Salary Finance has done, by using Paylink’s new ReFi™ technology. Their mission is to help millions of employees live financially happier and healthier lives. With their market leading position in financial wellbeing in the UK, they believe there is a significant opportunity to grow the service and save employees millions more.

In the landscape of personal finance, managing debt is a crucial aspect of financial health, and Fintech solutions, like ReFi™, are reshaping the narrative around refinancing in a way that is helpful for people wishing to make their budgets work. Refinancing should be a catalyst for a brighter, more financially secure future.

 

[1] https://themoneycharity.org.uk/money-statistics/

[2]https://www.ukfinance.org.uk/news-and-insight/blog/2024-choosing-right-product-transfer

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