Debt consolidation A step-by-step guide

Transcription

1 Debt consolidation A step-by-step guide

2 What is debt consolidation? The combining of all existing debt into a single, new loan that is more manageable and affordable. The new loan will typically have lower monthly repayments than those on existing debt. There are 3 important factors to successfully consolidate your employees debt: 1. Ability to spread repayments over a longer term 2. Saving on interest costs over the lifetime of their loan ( lifetime savings ) 3. Consolidating all debts to avoid a debt extension/spiral An effective pay rise is achieved when less of an employee s monthly salary is needed to service their debt. Over the next few slides we ll walk through how we achieve this at Neyber. The average UK household currently has more than 11,800 in unsecured debt (TUC analysis 2015). Almost two thirds of employees say they have borrowed in the last year to meet their basic financial needs (The DNA of Financial Wellbeing, Neyber). Financial stress is further driven by the excessive fees charged by lenders, particularly the payday lending market where in many cases the APR can reach over 1,000%.

3 True debt consolidation Lower monthly repayments borrow for up to 5 years at a low rate Neyber offers borrowers flexible loan terms of up to 5 years giving employees the ability to spread loan repayments over a longer period. In the example, consolidating existing debt with a Neyber loan over 5 years allows your employees to reduce their monthly repayments by 109 This equates to an effective pay rise of over 5%. Over 90% of our customers borrow for more than 2 years. Trying to consolidate debt over 2 years or less is typically unsuitable for employees and would actually lead to an increase in monthly repayments by 145 (+47%). Example loan comparison: Existing Debt Neyber Loan 5 years Comparable Loan 2 years Amount 10,000 10,000 10,000 Example APR 29.0% 6.9% 7.9% Debt repayment period 20 years 5 years 2 years Monthly repayment Difference in repayment % difference -36% +47% Effective % pay rise >5% -8% Note: (1) Minimum monthly payment is defined as the maximum of either 1% of current balance + interest or 25 (2) For credit card debt the minimum payment amount may reduce as repayments are made to the outstanding balance.. (3) Credit card interest rate of 29% represents average rate across current Neyber debt consolidation customers (4) Existing debt is composed of a 50% split between credit card and unsecured fixed term credit (over 5 years) (5) Loan size is based on an average of our portfolio of debt consolidation customers (6) Average UK salary of 26,500 used to calculate pay rise across all loans which is reflective of current debt consolidation customers (7) Representative example APR is 4.9%. APR based on current customer base. Typical example: amount of credit 7,000. Term: 3 years. Interest: Administrative fees 0. Monthly payment of Total repayment 7, The rate you are offered will depend on your individual circumstances. (8) All figures have been rounded to the nearest whole number *All figures quoted are based on existing Neyber customer base, as at May 2016 Employees can apply for loans for up to 5 years with counter offers for up to 7 years

4 True debt consolidation Save on interest repayments Our simple and fair rates range from Great (4.9% APR), Good (6.9% APR) and OK (9.9% APR) in order to accommodate for a variety of your employees circumstances. By making our rates more accessible we are allowing them to consolidate their debts into one single monthly payment and save on interest costs. In the example, Neyber provides a saving of up to 87% in total interest paid over the term of the loan. This lets your employees be free of their debt within a significantly shorter time period whilst managing more affordable monthly repayments. Example loan comparison: Existing Debt Neyber Loan 5 years Comparable Loan 2 years Amount 10,000 10,000 10,000 Example APR 29.0% 6.9% 7.9% Debt repayment period 20 years 5 years 2 years Total interest payable 13,509 1, Lifetime savings 11,716 12,695 % difference -87% -94% At Neyber we give your employees the flexibility to choose between saving more on total interest costs or spreading repayments over a longer period of time, depending on their individual circumstances. Note: (1) Minimum monthly payment is defined as the maximum of either 1% of current balance + interest or 25 (2) For credit card debt the minimum payment amount may reduce as repayments are made to the outstanding balance.. (3) Credit card interest rate of 29% represents average rate across current Neyber debt consolidation customers (4) Existing debt is composed of a 50% split between credit card and unsecured fixed term credit (over 5 years) (5) Loan size is based on an average of our portfolio of debt consolidation customers (6) Average UK salary of 26,500 used to calculate pay rise across all loans which is reflective of current debt consolidation customers (7) Representative example APR is 4.9%. APR based on current customer base. Typical example: amount of credit 7,000. Term: 3 years. Interest: Administrative fees 0. Monthly payment of Total repayment 7, The rate you are offered will depend on your individual circumstances. (8) All figures have been rounded to the nearest whole number *All figures quoted are based on existing Neyber customer base, as at May 2016

5 True debt consolidation Consolidate all your existing debt At Neyber, we aim to solve all your employees debt problems, and that s why we lend up to 25,000. This allows your employees to consolidate all their outstanding debt so that they can be debt free at the end of their loan term. Our average loan size is 10,000. In the example, an employee borrowing this amount to consolidate their debt would benefit from a reduction in monthly repayments of 36%. In contrast, if we were only able to lend up to 5,000 (approx. 20% of UK average salary) the total rate would only reduce to 23.7%APR and monthly repayments would still increase. This results in an increase in monthly debt repayments by 25%, making employees worse off. In summary, partial consolidation leaves employees vulnerable to the negative effects of debt extension as opposed to the benefits of debt consolidation. This presentation is commercially sensitive *All figures quoted are based on existing Neyber customer base, as at May 2016 Example loan comparison: Existing Debt Neyber Loan 5 years Amount 10,000 10,000 5,000 % of existing debt consolidated 100% 50% Existing debt remaining 0 5,000 Example APR 29.0% 6.9% 7.9% Debt repayment period 20 years 5 years 20 years After Consolidation Total Rate 6.9% 23.7% Total monthly repayment Difference in repayment % difference -36% +25% Comparable Loan 2 years Note: (1) Minimum monthly payment is defined as the maximum of either 1% of current balance + interest or 25 (2) For credit card debt the minimum payment amount may reduce as repayments are made to the outstanding balance.. (3) Credit card interest rate of 29% represents average rate across current Neyber debt consolidation customers (4) Existing debt is composed of a 50% split between credit card and unsecured fixed term credit (over 5 years) (5) Loan size is based on an average of our portfolio of debt consolidation customers (6) Average UK salary of 26,500 used to calculate pay rise across all loans which is reflective of current debt consolidation customers (7) Representative example APR is 4.9%. APR based on current customer base. Typical example: amount of credit 7,000. Term: 3 years. Interest: Administrative fees 0. Monthly payment of Total repayment 7, The rate you are offered will depend on your individual circumstances. (8) All figures have been rounded to the nearest whole number

6 How does this lead to an effective pay rise An effective pay rise is achieved when an employee reduces their monthly repayments by spreading repayments over a manageable period at a low rate. Reducing monthly repayments Consolidating with a Neyber loan means less of an employees monthly salary is needed to service their debt, and it is this which equates to a pay rise. The pay rise is calculated by dividing the annual amount saved in repayments by the net annual salary. Reducing the total interest paid on debt also provides a reduction in the overall cost of debt. Lifetime savings Employees can save money over the lifetime of their loan by reducing the interest paid. They do this by repaying at a lower rate over a shorter period of time, which also reduces their monthly repayments. Total savings are calculated by subtracting the overall cost of the current debt by the overall cost of the Neyber loan. This presentation is commercially sensitive

7 Employee benefits Reducing financial stress creating a happy workforce Every year businesses across the UK are impacted by employee financial stress. Employees suffering from financial stress tend to have more days off sick and are likely to be less productive when at work*. Neyber can save the average employee in excess of 11,000 over the lifetime of their outstanding debt, thus reducing financial stress and boosting productivity. For example, a company with 1,000 employees, consolidating debts with Neyber provides lifetime savings of 2.3M across the workforce. The maths Average # of employees Average consolidation amount Lifetime savings per employee Take-up rate 1,000 10,000 11,715 20% On average, this can increase the productivity of your workforce by 4%**. Neyber provides a simple and effective solution to financial stress. Creating a workforce that is happier, more knowledgeable and more productive without having to worry about making it to the end of the month. Average workforce savings 2.3M Increase in workforce productivity 4% Note: (1) Increase in workforce productivity is calculated as the cost of payroll (average salary * employees) * 20% (take-up) * 20% (loss in productivity from financial stress) (2) Average workforce savings is calculated as lifetime savings per employee * take-up * employees ** Assuming uptake of 20% *Based on Neyber s The DNA of Financial Wellbeing report, 2016

8 Neyber achievements to date We ve invested a significant amount of time and effort developing a solution that meets the objectives of employers, while serving the needs of their employees. With over 25m lent to date, we ve created a solution that helps people be 101 better off every month, on average, when consolidating debt. Our solution is a true debt consolidation loan that allows employees to: Lower monthly debt repayments by spreading repayments over a longer term at a low rate Our loan book We ve lent to over 2,500 people across the UK. Our average loan size is 10,000 over an average term of more than 4 years. We ve successfully consolidated the debts of our customers and most importantly, we have reduced monthly debt repayments by over 20% to deliver an effective 5% pay rise to employees - at no cost or risk to the employer. We don't rely on third parties and have developed our own underwriting and customer service operation to ensure that the products we develop meet the needs of employers and employees. Consolidate ALL of their existing debt into one simple, more manageable and affordable loan We have designed three simple rates*, that can give as many of your employees access to fair finance as possible. All figures quoted are based on existing Neyber customer base, as at May 2016 *Three simple and fair interest rates include, Great (4.9% APR), Good (6.9% APR) and OK (9.9% APR)

9 Keep in touch Monica Kalia Chief of Strategy and Business Development Brendan Kelley Head of Partnerships Financial Wellbeing Team Heidi Allan Head of Insights and Engagement T +44 (0) M +44 (0) E monica.kalia@neyber.co.uk T +44 (0) M +44 (0) E brendan.kelley@neyber.co.uk T +44 (0) M +44 (0) E heidi.allan@neyber.co.uk Copyright 2016 Neyber - All Rights reserved Neyber Ltd is authorised and regulated by the Financial Conduct Authority. Interim permission:663054; Registered address Liberty House, 222 Regent Street, London, W1B 5TR; Company registered number: ; Data Protection Registration Number: ZA39009 Neyber intends to offer customers a range of investment options for regular, salary deducted contributions to their investments portfolio with access to a range of higher return investment/lending products including tax efficient ISAs. Such products will not be eligible for the Financial Services Compensation Scheme. company/neyber