Personal loans 'a better choice than credit cards'
Oct 31, 2006
Personal loans are a better option than credit cards for borrowers worried about problem debt, due to the more structured repayments they offer, the Association of British Credit Unions (ABCUL) has claimed.
A recent report from The Debt Counsellors found that debts from credit card payments were the biggest cause of serious debt in the UK. Credit card debt was found to be a factor in 91 per cent of all serious debt cases, with their unstructured repayment system regarded as the main reason for this.
Personal loans have the advantage of having a more structured repayment system where the borrower is aware of how much needs to be paid back, ABCUL spokesperson Abbie Shelton said. With credit cards, borrowers often just pay back the minimum, making it a long time before the loan is paid off, with credit cards proving very dangerous in the wrong hands, she added.
Ms Shelton said that credit card companies should provide better ways of explaining to people how much they are borrowing and how much they will have to pay back, as this could help people to manage their money. The strict regulatory regime applied to loans and other forms of borrowing could easily be applied to credit card borrowing to help ease the problem.
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