Repaying a Loan
Credit - handle with care
Summary: Loans are easy to get but can be difficult to repay. Don't overstretch your resources.
Few of us can have missed seeing the advertisements in which an individual or a couple smile happily when they are offered debt consolidation which would roll all their debts up into a single source commitment. Only one monthly payment to make and this at a lower level than the sum of the all the separate payments previously made. They are happy because their life has been so simplified, but do we ever ask ourselves who got them into all this debt in the first place?
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It is easy to blame the banks, building societies and loan companies, who it must be admitted have made some extremely tempting offers - live now, pay later, the interest rates are lower than they have been for years. For those wanting to brighten up their lives a little with something new but beyond their means, or perhaps just those who feel short-changed by life if they cannot keep up with their neighbour's and friend's standard of living, the temptation is very strong.
It is unfortunately too easy for them to do the sums and decide they cannot afford to replace their old banger with that shiny new car, and then to throw their calculations away and say 'Oh, what the heck. Let's go for it'. So who got them into the problem situation in the first place? They did of course. Apart from the utterly desperate who don't know what to do to solve their financial problems, we all have a choice with debt. There are the calculated necessary debts which we would be hard put to do without, mortgages being perhaps the prime example. Without this facility the majority of us would be living in rented accommodation with no hope of home ownership.
At the other extreme there are what might be called the 'flippant' debts, of the 'couldn't afford it but had to have it ' variety. In between these extremes are a host of reasons for debt, but all have one thing in common. They were entered into voluntarily. This is the point; no force, no coercion, just temptation - give in to it and you could face many years of worrying about how to meet your commitments.
There is a general belief that such problems chiefly affect the younger age groups. Certainly they are very likely to find that cash is in short supply, especially when setting up a home, and will be on the look out for opportunities which will enable them to spread it further. This is borne out by statistics provided by uSwitch (an online account switching service) which show that in the 18 to 29 age group, some 20% are permanently overdrawn, one third of them because they are using the overdraft to pay off other debts.
