It is an unwelcome development that many struggling homeowners are increasingly turning to short term loans to meet their long term mortgage committments.
According to financial website, MoneySupermarket.com, 7 per cent of households – or 1.8 million families have taken out unsecured loans (personal loans, credit card loans) to help meet with their mortgage payments.
In the long term this offers a bad deal for consumers. Interest rates on loans are between 8-9% higher than a mortgage loan, typically 6%. Credit card interest rates are even higher with rates reaching 17-18%.
The increased demand for unsecured lending has occured because of rising energy prices and mortgage costs. The increased cost of living could lead to a year of declining living standards as household budgets are placed under increasing strain.
Taking out loans to pay your mortgage payments may provide a short term fix, but, they also build up longer term problems and could make it difficult to remortgage. They will also exacerbate any problems of negative equity.
Alternatives to Loans
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Taking out a loan to cover a shortfall in income can never be a wise solution! Instead negotiate with your bank. Negotiate with your company. Create yourself a new income source. Shift youyr financial perspective. Is it time to sell up and down shift? Could your investment be safer elsewhere? Move your income to a recession-proof sector. Retrain. Take on more responsibilty in your community to boost your resume/CV. Reassess your abilities and assets. But don’t bolster your failing finances by going into more debt to pay off debts! Get professional advice and get it quick! And determine to build yourself mul;tiple streams of income into the future so you never again rely on just one source of finance. You can win: just take on board the winning attitude.
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