Research conducted by price comparison site uSwitch.com found that the actual cost of switching is low, with one in four lenders not charging anything, and 67% charging a typical early repayment penalty of one month’s interest, or around £39.

This fee is small, particularly when compared to the £166 a year consumers could save by opting for a more competitive deal from the outset. With eight major personal loan providers already having dropped rates over the past month by up to 5.5% APR, there has never been a better time to switch.

Mike Naylor, uSwitch personal finance expert, said: “In such a volatile unsecured personal loan market, five years is a long time to sick with the same provider, as rates fluctuate constantly. For example, in the second half of 2007, more than 30 providers increased loan rates by around 1% APR. However, since the last base rate cut at the beginning of December, eight major lenders, including Alliance & Leicester, Moneyback, Lloyds, Barclays and Sainsbury’s, have already cut their rates by up to 5.5% APR. With more base rate decreases predicted over the next 12 months it’s possible that we may see other providers following this example and offer more competitive deals than those available last year.”

Naylor added: "The days of being able to shop around for best-buy personal loans are well and truly numbered, with seven of the big providers now operating personal pricing. This new sales tactic provides a personalised rate for each loan applicant and no longer allows consumers to compare competitive APRs, as they are not advertised.

"While they still can, consumers should give loan providers the wake-up call they need and move their business elsewhere if better deals become available. Whilst consumers continue to display this level of apathy, loan providers will rub their hands together with glee and continue to profit from the not so tarty loan customers."

Tips for switching loans:

• Contact your lender first to find out how much it will cost you to pay your loan off early.
• Compare this to the cost of the new loan, taking into account the cost of the settlement figure.
• Avoid lenders that offer personal pricing as they do not advertise rates for comparison.
• Don’t just stick with your current account provider; online rates can be more competitive than those offered in-branch.
• Use a comparison site to get the best deal, don’t trudge up and down the high street.
  

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