More advice needed on financial commitments
Oct 09, 2006
Homeowners are risking getting themselves into problem debt by over-committing to loans and other kinds of credit, a new report claims.
Around 770,000 people in the UK missed one or more mortgage payments in the last 12 months, with those aged 21 to 24 most likely to miss payments, charity Citizens Advice found. The charity dealt with more than 51,000 enquiries about mortgage and secured loan arrears in 2005/6 and believes that more education is the key to helping people manage their finances.
Missed payments on mortgages or loans can lead to arrears and possibly repossessions in the worst of cases, although this is rare. There is a clear need for more information and advice about the consequences of taking on substantial financial commitments, particularly for younger adults who often fail to appreciate the scale of their borrowing.
The research from the charity also found that many people didn't understand what mortgaging really was, or that if payments were missed, they could ultimately lose their home.
Around 11 per cent of survey respondents thought that a secured loan was one in which the borrower can miss payments and their home will always be safe while ten per cent thought it was a loan where the borrower can choose to pay back as much or as little as they like each month. Some secured loan arrangements are flexible but many have firm repayment requirements. People struggling to meet those repayments should always consult their lender before making any payment adjustments themselves.
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