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Loans Are An 'Essential Tool' For Britons

Oct 13, 2007
Those who have taken out a loan or some other form of borrowing should take the time to think about their ability to manage their finances, an industry expert has commented.

Lisa Taylor, analyst for Moneyfacts, reported that personal loans and various types of credit have become more popular over recent years as they have helped consumers to manage their finances through various peaks and troughs in their spending and allowed them to make purchases that they may not have been able to. In addition, Ms Taylor asserted that when "used wisely" products such as credit cards and loans can be a "great budgeting tool".

However, the price comparison representative advised borrowers, if possible, to make more than the minimum repayments on their lending as otherwise they will only find their debt difficulties increasing as it takes longer to complete paying back their loan. Pointing to a fall in the level of minimum payments made, in addition to the effect of the five interest rate rises since August 2006, she reported that a rising number of Britons are on track to witness the time spent paying back their debts being spread "over a much longer period". And by only contributing a minimal amount of money each month, Ms Taylor suggested that some consumers may not be able to cover the interest bill accrued on their borrowing.

She said: "During the last generation, we have moved from an era where credit was hard to come by, where people saved up to make large purchases and where many more people lived within their means, to now where we see credit being used by many as an essential tool to meet day-to-day living costs and to make those more expensive purchases. But by relying on plastic to supplement our income, rather than to manage our cash flow, it's easy to see how some people can be caught in a debt cycle, facing a lifetime of debt".

Accordingly, the Moneyfacts analyst reported that borrowers need to "take control" of their borrowing. Ms Taylor stated that by making more than the minimum repayments each month on personal loans and credit cards, consumers "can knock years off [their] debt". It was advised that setting up a standing order could help people to manage their finances more effectively as the level of money taken out if their account each month can be set at a level with which they feel comfortable.

For those looking to supplement their spending, seeking out a cheap loan could well be an advisable option for borrowing money competitively. However, after taking out a loan consumers should look to plan their finances carefully and be aware that they need to be in a position to meet demands for repayment. Earlier this year, Susan Hannums, savings manager for AWD Chase de Vere, claimed that while borrowing via personal loans and credit cards is an attractive option for many consumers, there is a need to be "totally sensible" as they should remember that they will eventually have pay back their credit. She also advised those who are struggling with their money management to seek professional guidance as early as possible.
About the Author
Tom Dawson writes for Essentially Home Loans where visitors can apply for secured loans online, we also specialise in bad credit loans for UK residents. Visit Today: http://news.essentiallyhomeloans.co.uk
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