Experian & Paylink Solutions Launch Debt Consolidation Tool

Credit reporting giant Experian has announced a partnership with Paylink Solutions, a leading provider of affordability software and payment services. 

The collaboration will integrate Paylink's innovative ReFi™ product into the Experian Marketplace, potentially opening doors to credit for millions of consumers previously struggling to qualify for debt consolidation loans.

The timing of this partnership is particularly significant, as leading markets grapple with an ongoing cost-of-living crisis that has pushed many households into financial difficulties. 

Experian: Boosting debt consolidation loan approval

Recent data from Experian reveals a stark disparity in loan approvals: while 59% of credit card applications receive pre-approval on the Experian marketplace, only 37% of debt consolidation loan applications meet the same fate.

This gap in the market has led to concerning trends, with over 3 million people turning to unlicensed lenders or loan sharks, and more than 10 million borrowing from friends and family. These statistics underscore the urgent need for more accessible and regulated debt consolidation options.

Eduardo Castro, Managing Director of Experian Consumer Services, says: “As people continue trying to get on top of their finances amid the increased cost of living, our aim is to remove any barriers that will prevent them from doing so. 

“Our new partnership with Paylink will allow us to unlock access to credit for more consumers seeking to simplify the process of managing their debt.”

The crux of the problem lies in the current lending system's limitations. Lenders have been unable to directly settle customers' existing debts when issuing a debt consolidation loan, instead relying on borrowers to use the funds appropriately. 

This approach has created a twofold challenge: lenders must factor in both the new loan and existing debts during the underwriting process, often resulting in loan applications being deemed unaffordable. 

Additionally, there's no guarantee that borrowers will use the new loan to clear their existing arrears, potentially exacerbating their debt situation.

Exploring ReFi™

Enter ReFi™ by Paylink Solutions. The product aims to bridge the gap by enabling direct settlement of existing credit commitments through the Experian Marketplace. By consolidating various forms of debt – including credit cards, personal loans, retail credit and overdrafts – into a single, more manageable loan with improved terms, ReFi™ promises to simplify payment management, reduce monthly costs and mitigate the risk of further debt accumulation.

Jake Ranson, CEO of Paylink, adds: “Against the backdrop of a prolonged cost of living crisis, ReFi™ has already proved its value to thousands of customers who, by shifting legacy debts to a new more affordable loan, have transformed their monthly household budgets. 

“ReFi™ enables a financial 'reset,' potentially leading to significant savings and quicker debt repayment.”

The partnership is expected to yield benefits beyond individual consumers. Lenders stand to gain from an expanded customer base and reduced risk. 

As Jake explains: “It also provides lenders with assurance that the new loan is affordable and will be used to clear previous debts, helping customers achieve their financial goals.”

This collaboration comes at a time when the debt consolidation market is under increasing scrutiny. Financial regulators have been pushing for more responsible lending practices and better protection for vulnerable consumers. 

By providing a transparent and regulated pathway to debt consolidation, the Experian-Paylink partnership could help address some of these concerns.

Moreover, the initiative aligns with broader efforts to improve financial literacy and inclusion. By making debt consolidation more accessible, it could empower consumers to take control of their finances and make more informed decisions about credit.

However, challenges remain. The success of this initiative will depend on factors such as consumer awareness, the willingness of lenders to adopt the new system and the ability to navigate complex regulatory requirements. 

There's also the question of how this solution will interact with other debt management strategies, such as debt advice services and formal debt relief schemes.

Despite these potential hurdles, the partnership between Experian and Paylink Solutions represents a significant step forward in addressing the UK's personal debt challenges.

Edouardo concludes: “The benefit of this partnership is twofold, as the ReFi™ solution offers a valuable tool for lenders to expand their offerings and reach a broader customer base that may have originally been overlooked."

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