In Debt to Pay Off Debt

Secured loans have become under fire in the finance world as it is understood that they are worsening the UK’s crippling debt problem.

As the world slipped slowly into recession nearly two years ago, caused principally by the sub prime mortgage crisis in the US, the UK was already grappling with a worsening debt problem caused predominantly by overspending on credit cards. However, worrying information from the Consumer Credit Counseling Service has indicated that rising debt levels in Britain are the result of a surge in the amount of secured loans taken out by people with poor credit ratings who are now struggling to pay back what they owe.

Not for the first time, the media has been blamed for the worsening situation. For example, towards the beginning of the recession in the UK, the BBC was accused of frightening thousands of consumers into withdrawing their savings from bank Northern Rock, worsening an already tense situation. Robert Peston, the Business Editor who broke the news, was grilled by the Government in a Committee on Press Standards earlier this year.

Now, criticism has been aimed principally at the advertising seen on channels like ITV1 and Channel 4 to name a few in the past few months. With accusations that secured loans have been wrongly advertised as a way to get out of debt for good by loan companies, the Advertising Standards Authority (ASA) has been challenged as to why action wasn’t taken. The ASA coming under fire came in the wake of a shock statistic which revealed that secured loans worsen a credit card debt in 83% of cases. One financier commented that the use of a secured loan to consolidate a plastic balance was a terrible combination.

But that’s not all

If the reputability of the secured loan was not bloodied and battered enough, further scathing attacks have been launched - questioning whether the acquirement of a secured loan with the purpose to consolidate a debt should be legally acceptable. This in the hope that vulnerable consumers could obtain some form of protection against further debt. The focal point of yet another controversy surrounding secured loans is interest rates. Loan companies have come under fire for cashing in obscene amounts of money on the back of people who are struggling to make ends meet.

As secured loans naturally have a longer repayment period, as well as variable interest rates which means that the interest paid can fluctuate over time, more interest is paid when put into contrast with an unsecured loan. For example, borrowers which take out a significant secured loan over a maximum 25-year repayment period could pay back double what they borrowed in the first place due to extortionate interest rates.

The recession is biting and financiers are pointing the finger at the secured loan. It seems the light at the end of the tunnel is ever distant and the green shoots of the economy are few and far between. Now, experts are urging indebted consumers with bad credit to look for cheaper and better alternatives to what could be regarded as toxic secured loans.

Bad credit secured loans
Is your poor credit score preventing you from getting the secured loan you need? Well all is not lost because help does exist for people with bad credit ratings.