Monday 18th of January 2010
The average interest rage charged on illegal borrowing over Christmas was equal to an 825 per cent annual percentage rate, a claim suggests, which could highlight how repaying debt through an individual voluntary arrangement (IVA) is better for long-term financial security.
A new report by thinktank the Financial Inclusion Centre and Circle Anglia reveals that the total value of such loans was around £29 million - although the final cost of repayments could total £82 million.
When high-interest repayments prevent people keeping on top of their unsecured debt - such as loans from banks and building societies - then they may find an IVA answers this problem.
IVAs can freeze the interest rates on unsecured debt, meaning that households could face more controllable repayments, rather than seeing their cash disappear under climbing interest rates.
Debt on our Doorstep urges cash-strapped consumers to look at other options than loan sharks - which could include getting IVA answers, rather than turning to illegal borrowing.
Faisel Rahman, board member at Debt on our Doorstep, says: "There are alternatives out there for people and they need to know that these alternatives exist."
One such alternative could be an IVA, which can also merge different unsecured debt commitments into one, monthly repayment.
By Neil Burton
- 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
- Credit Action: Brits borrowing millions every day
