Thursday 24th of September 2009
Individual voluntary arrangement (IVA) advice could be required by Britons with personal loans who cannot keep up with their repayments.
The Daily Mail reports that lenders concerned that borrowers are unable to keep up with loan repayments are pushing up the interest rates on such credit.
An 11.2 per cent rate on a £5,000 loan would leave households forking out £163 a month. But the average rate on a £5,000 loan is now 12.2 per cent, which pushes up the monthly repayment to £165.
With recent research from Bright Grey revealing that the average Briton is £155 away from a financial meltdown, IVA help could be sought by cash-strapped consumers.
Not only can an IVA freeze the interest rate on unsecured loans, but it may also clear up to 70 per cent of the money that people owe, potentially avoiding the need to be declared bankrupt.
Commenting on the fact that lenders are pushing up interest rates, the newspaper says: "As a result, all customers will now have to pay a higher cost on personal loans to cover the minority of customers who will actually default."
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: Debt takes a large chunk out of incomes
