Wednesday 16th of December 2009
The way that some credit card lenders clear their customers’ debt is impacting upon the vulnerable the most, a new poll says, which could include those single-parent families and elderly people with debts of more than £15,000.
A number of Britons rely on credit cards when no other source of cash is available. But Nationwide warns that many lenders put their borrower’s repayments towards the cheapest debt first, leaving the largest debt - which could have higher interest rates - to pile up.
Households stuck with credit card debts of significant levels could use an individual voluntary arrangement (IVA), although they may have a few questions about the benefits of this repayment plan.
An IVA states that credit card lenders should not pursue legal action against their customers unless repayments are not made.
Furthermore, they are advised not to get directly in contact with them, which may be a common concern of vulnerable borrowers, like the elderly and single-parent families, who are scared about unwanted phone calls and visitors.
"There are a few providers, including Nationwide Building Society and Saga, which clear the most expensive debt first, but the vast majority work the other way around - something that is widely misunderstood by consumers," asserts moneysupermarket.com’s Clare Francis.
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
- Borrowers may have to take the first step to IVA advice
