Borrow a loan, nurture a debt
Loans are the bad boys of the credit world and are guilty of causing huge amounts of debt.
Credit cards usually cap the maximum credit limit. However, when it comes down to credit limits, loans are much worse and actually cap the minimum amount that you can borrow. People are finding it virtually impossible to apply for a loan to the value of £2000, as the minimum amount offered is usually between £3000 and £5000. This encourages people to borrow more than they actually need.
Loan companies also penalize non homeowners, students and the self employed by charging them higher interest rates than those with a good income and their own home. They actually cause more debt by overcharging those who cannot afford to repay. Only the privileged are able to obtain a loan with good interest rates.
If your creditor has overlooked your bad credit history and offered you a personal loan, make sure that you are aware of the interest charges incurred, as they are likely to be over inflated. Make sure that you can afford the repayments.
If you are a homeowner, you will benefit from a low interest rate but your house will be used as collateral. This means that if you cannot meet the repayments, your property will be sold to cover your debt.
Further Information:
You can get further information about loans and other debt solutions from the Debt Advice Trust. They are a not for profit organisation that offers free debt advice.
Finance News posted on 30/05/2007 15:57:38
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