Uk Debt Increases But Its Nothing To Do With A Mortgage


Uk Debt Increases: But It’s Nothing to​ Do With a​ Mortgage
Debt charities have reported they are hearing from an​ increasing number of​ people whose spending is​ out of​ control.
On average,​ people who turn to​ the​ Consumer Credit Counselling Service for advice owe £31,​000 which does not include their mortgage.
The rising trend means more Britons will need to​ reduce interest and actively manage debts .​
The large sums involved also mean that more will find themselves in​ the​ dangerous territory of​ unregulated loans.
But in​ their desperation,​ consumers attempting to​ take control of​ their debts are being warned to​ beware of​ unregulated loans that can lock them in​ for years and leave them at​ the​ mercy of​ rocketing exit charges.
As the​ name suggests,​ these loans fall outside the​ normal safeguards we have come to​ expect when borrowing money .​
They are typically loans made to​ individuals,​ outside any mortgage arrangements,​ for amounts above £25,​000.
Personal loans for amounts below £25,​000 are subject to​ the​ Consumer Credit Act .​
This ensures lenders cannot impose excessive fees or​ conditions on​ their customers.
These protections are particularly valuable when borrowers want to​ pay off their debts early .​
In these circumstances the​ Act says lenders cannot charge a​ fee of​ more than one month's interest .​
Better still,​ if​ the​ term of​ the​ loan is​ one year or​ less,​ lenders cannot charge and early repayment penalty.
Mortgages,​ usually for more than £25,​000,​ have their own protection provided by the​ Financial Services Authority .​
Its rules mean that when borrowers repay a​ mortgage early or​ fall into debt,​ charges are limited to​ the​ costs the​ lender will incur.
None of​ these safeguards are enjoyed by borrowers who take out unregulated loans .​
Unregulated lenders include complicated and costly repayment penalties in​ the​ small print of​ their contracts .​
Arbitrary charges for early repayments are common and penalties can lock borrowers in​ for years,​ during which time they are also at​ the​ mercy of​ rising interest rates.
So do secured loans make sense? While secured loans can make financial sense in​ certain circumstances,​ as​ borrower,​ you​ should carefully assess the​ terms and conditions attached to​ the​ loan.
You also must be certain that you​ can repay the​ loan .​
The lender enjoys the​ security aspect of​ the​ loan,​ not the​ borrower .​
If you​ cannot handle the​ repayment,​ the​ lender can forcibly sell your house to​ recover the​ loan.
This is​ why many consider the​ secured loan as​ a​ last resort and that the​ only justifiable reason for such a​ borrowing option is​ a​ need to​ reduce or​ consolidate existing debt costs.
The two leading reasons for taking out a​ secured loan are unsecured debt consolidation and financing home improvements.
Other popular reasons for secured borrowing are mainly buying a​ new car,​ paying for a​ wedding and buying property abroad.
Given the​ UK public's current appetite for borrowing,​ the​ secured loans industry is​ unlikely to​ go into recession .​
Datamonitor research expects such loan advances to​ reach £51 billion by 2008.



Uk Debt Increases But Its Nothing To Do With A Mortgage



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