The Guardian wrote a piece on secured loans yesterday, succinctly pointing out that consolidation loans are generally taken out by those who are in dire debt circumstances as they feel this is the only option left to them.
It has become apparent though, that many people who go on to take out a consolidation loan do not realise that they are putting their house in jeopardy. People don’t seem to comprehend and still believe it is only the mortgage that is secured against their home. Even though the phrase ‘failure to keep up with your payments may result in your home being repossessed’ is generally prominently displayed in advertisements on TV and magazines, studies have pointed out that borrowers don’t think this includes their other debts.
The Consumer Credit Counselling Service (CCCS), have seen a rise in homeowners suffering real problems with repayments after getting a debt consolidation loan. These loans are only suitable for a small percentage of people who are looking to help with their debt, about 3% of the population. However many advertisements make it seem like it is the answer to most peoples growing debt problems when in actual fact it often makes them worse. Many people then go on to get into further debt.
A few sensible points suggested if are looking at taking out a consolidation loan:
- Check the small print for penalty charges
- Don’t borrow more than you really need
- Don’t automatically opt to pay the Payment Protection Insurance - for most it is unecessary - think carefully first
View the article in full here
You can visit Consumer Credit Counselling Service for free debt advice at www.cccs.co.uk
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