Sunday 13th of December 2009
Many consumers are caught out when they need to find amounts such as £250 at short notice and are often pushed to take on high-interest personal loans to cover this expense, a claim suggests.
According to the Office of Fair Trading (OFT), there is a link between consumers who struggle to find such small amounts of cash at short notice and those who use payday loans, pawn-broking, mobile phone text loans and log-book loans.
But with such borrowings often come high interest repayments and arming themselves with an individual voluntary arrangement (IVA) rather than yet more credit could prove to be a responsible step for borrowers.
Getting out of the circle of debt can be less of a struggle with an IVA, although it does require a commitment of around five years and people must meet their monthly repayments, which will be more manageable.
"Some consumers that were previously able to access some mainstream products have been forced to consider higher-risk and, in some cases, more expensive sources of finance," the OFT report said.
Individuals may find that an IVA answers their money problems and improves their credit rating more reliably and favourably than payday and log-books could ever do.
By Kim Parsons
- House price rise 'may not indicate recovery'
- Equity release 'needs to be increased'
- Need for IVA help could increase as expert predicts reduction in lending
- Government announces 'breathing space' for those needing IVA help
- Lack of subprime lending creating need for IVA help, expert suggests
- Bankruptcy-threatened Britons may turn to IVA advice
