Thursday, August 19, 2010
Category:
Consolidation
According to a new report by Consumer Focus, the number of people taking out ‘expensive payday loans’ has increased fourfold over the last four years.
The consumer champion has stated that these short-term loans, which are typically repaid on the borrower’s next payday, could lead to a ‘downward spiral of increasing debt’ if people cannot repay them the following month. Charges can reportedly ‘quickly balloon’ if borrowers defer payments or take out repeat loans.
Consumer Focus has estimated that the number of people using payday loans has increased to 4.1 million since 2006. It has been revealed that typical interest charges range from £13 to £18 for every £100 borrowed, but can reach £30 to £100 when borrowing from some online lenders.
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Homeowners who have multiple loans, credit cards and hire purchase agreements, could consider taking out a secured loan to tie them all up into one place. One of many finance options available, a secured loan for
consolidation could leave borrowers with just one monthly repayment, which could even be lower than the sum of current outgoings. Borrowers could therefore be left with more money each month, which could potentially be set aside in a savings account for a rainy day. However, if opting for a secured loan to consolidate existing credit, it should be remembered that consolidating your debt may increase the amount you pay back overall and extend the repayment periods of your debts.
