Experian has partnered with Paylink Solutions in a bid to address affordability restrictions for debt consolidation loans.

The affordability software and payments provider will use its ReFi solution to allow Experian Marketplace customers to settle existing credit commitments through a more “streamlined process”.

It repays legacy debts - such as credit cards, personal loans, retail credit, and overdrafts - by consolidating them into a new loan with more favourable terms.

The move aims to expand access to credit for a wider range of consumers through Experian Marketplace by simplifying managing payments and reducing monthly costs, which in turn can help to mitigate the risk of accumulating additional debt.

The new partnership comes as debt consolidation remains the number one reason consumers search for loans on the Experian Marketplace.

Experian said that many individuals who need these loans struggle to qualify due to affordability restrictions, with data from the company revealing that only 37 per cent of debt consolidation loan applications are pre-approved on its marketplace vs 59 per cent pre-approval for credit card applications.

"This vacuum often leads to illegal lending practices and over three million people have used an unlicensed lender or loan shark while over 10 million have borrowed from friends and family," continued the consumer credit reporting business.

Lenders are currently unable to directly pay off customer debts when they take out a debt consolidation loan, instead relying on customers using the loan funds appropriately.

"This complicates the underwriting process as it means lenders need to double count both the new loan and existing debts, often resulting in the new loan being deemed ‘unaffordable’," added Experian. "If granted, there is a risk that the new loan will not be used to pay off existing arrears and the customer ends up accumulating more debt."

Eduardo Castro, managing director of Experian Consumer Services, said: “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."

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