Last week Mrs Patterson applied for a loan of £2,000 for making some improvements to her home. As she worked for one of our payroll partners – Sheffield Teaching Hospitals, she was eligible to apply for our Payroll loan product.
While assessing her application, one of our lending officers noted that Mrs Patterson also had a credit card with a balance of around £800 on. Other than this she had no other outstanding credit, and her credit record was excellent.
From Mrs Patterson’s bank statements, it could be seen that she was making regular payments to the credit card. The interest payable on the credit card was approaching 40% APR. The payments she was making were a little over the minimum payments, but were not significantly reducing the balance due to the high interest rate on the credit card.
The lending officer approved the £2,000 loan which Mrs Patterson applied for, which was on top of Mrs Patterson’s existing loan balance with Sheffield Credit Union of around £400. The lending officer also contacted Mrs Patterson to see if she wanted Sheffield Credit Union to consider lending her an additional £800 to pay off her credit card.
Mrs Patterson was happy with this solution, and was able to keep her monthly repayments to Sheffield Credit Union at £100 per month. Because she benefited from a reduction in the interest rates (reduces from 17.5% APR to 10.7% APR on Payroll loans of £3,000 and greater), the saving Mrs Patterson made was staggering.
The additional £800 used to repay her credit card will cost Mrs Patterson a total of £34.44 in interest over the whole term of her loan. This could save Mrs Patterson around £250 in interest, compared with that which she was paying to the credit card company.