TSB borrowers will be able to take short-term loans from the bank in the future, as it plans to offer an alternative to payday lenders, loan sharks and overdrafts.
The bank has revealed that it is planning to launch a series of new short-term personal loans to help those with cash flow problems.
It has not yet disclosed the rates and terms for which people will be able to borrow or when exactly the new offers will launch, but it says they will target working families and those on variable incomes.
The bank says it wants to fill the void where borrowers feel they have no alternative but to take out more expensive types of credit.
It currently offers personal loans of between £7,500 and £25,000 for those borrowing between one and five years at a competitive rate of 2.9%, which was reduced this week from 3.2%.
It is therefore likely that its new range will be for loans under one year for amounts below £7,500.
How to get out of debt
A RECORD number of Britons are seeking help to manage their debt.
While getting back on track can seem like a daunting task, we’ve looked at what you can do to help you along the way.
Get help for free: There are many groups that can help you with your debts.
- Advice to citizens – 0808 800 9060
- Stage change – 0800 138 1111
- National debt line – 0808 808 4000
Don’t ignore bills: Ignoring your bills won’t make them go away, tempting as it may be, and the problem will likely get worse. It’s best to tackle debt head-on by figuring out exactly what you owe and when you need to pay it back.
Make a budget: Once you know what you need to repay, it will become easier to prioritize your finances. The next step is to create a detailed budget so you can see how many inputs and outputs you have. Use an online tool such as Advice to citizens to help you do that.
Change and save: Households can save hundreds of pounds by checking to see if they can get a cheaper deal elsewhere. In fact, MoneySavingExpert says families can save an average of £330 by switching from standard variable fares (SVT) to a better rate. Use a comparison site like MoneySuperMarket or Energyhelpline to see what deals are available.
Get a balance transfer card: If you’re paying interest on your credit card balance, it can potentially increase your debt. A better option might be to get a 0% balance transfer card. These types of cards will allow you to transfer an existing balance to a new card and give you the option of clearing it entirely without incurring interest. The MoneySavingExpert Eligibility Calculator will inform you of the offers for which you are likely to be eligible. You will need to have a good credit rating to qualify.
Check if you are entitled to benefits: It is important to check whether you are entitled to additional benefits or tax credits if you experience financial difficulties. Advice to citizens can help you see what help is available and there is a benefits calculator on the Gov.uk website. Aid ranges from tax credits, jobseeker’s allowance to universal credit.
Also consider: You can find information on Debt Management Plans (DMPs) and Individual Voluntary Arrangements (IVAs) on the Financial advisory service website and on the government Gov.uk website. But make sure you know exactly what you’re getting into, because these plans aren’t for everyone. Many companies charge a fee for the service, either up front or built into your monthly payments.
As for today’s best buys under £7,500, Cahoot and Santander offer the cheapest loan at a rate of 13.5% on borrowing between £1,000 and £1,999.
Meanwhile, Ikano charges 13.4% on £2,000-£2,999, and Admiral sets rates at 8.2% for £3,000-£4,999.
Admiral is also the cheapest for loans between £5,000 and £7,499, charging 3.4%, according to MoneySavingExpert.com.
Of course, the rate you get varies depending on the amount you borrow and your credit history, and only 51% of applicants should be offered the advertised rate.
So use an eligibility checker, such as MoneySavingExpert.com’sto check your chances of being accepted first without affecting your credit score.
By comparison, short-term lender Amigo charges 49.9% on loans between £1,000 and £10,000 over 12 and 60 months, while payday lenders have been known to charge upwards of 1,000%.
If you only need a small amount of money in the short term, you might be better off getting an interest-free credit card as long as you’re sure you can pay off the debt before the end of the term. 0%.
Of course, the problem is that often personal loans and credit cards can only be taken out by those with decent credit scores, leaving others to turn to more expensive alternatives.
A TSB spokesperson said: “Customers told us they wanted more help managing short-term cash flow issues and wanted a bank that offered better options when borrowing for shorter periods.
“That’s why we recently reduced our overall rate on unsecured personal loans to 2.9% APR, and why we’re offering one-month payment holidays to customers with personal loans.
“We are currently in the process of developing short-term loan products to better meet the needs of our customers.”
Short-term lender Amigo Loans has gone up for sale – here’s what it means for borrowers.
Meanwhile, banks have been warned to help customers with large overdrafts.
It comes as banks hiked rates from April 6 to 49.9%.