By Melanie Taylor
There's nothing wrong with debt in itself. Without debts such as mortgages and car loans, we wouldn't be able to live our lives the way we want. But once we can't afford our debt repayments, it's time to ask for help, seeking expert debt advice or looking into professional debt solutions such as a debt management plan, debt consolidation loan / mortgage, IVA (Individual Voluntary Arrangement) or Trust Deed. The alternative could be doing something we'd normally never consider – like paying the mortgage (or other large debt) with a credit card.
According to housing and homelessness charity Shelter, about 85% of the UK's £1.4 trillion personal debt is secured against property. The good thing with secured debts, of course, is that they normally come with a lower APR (Annual Percentage Rate) than unsecured debts. Nonetheless, a mortgage is by far the biggest debt most people will ever have. It's a commitment to spend a long time paying a lot of money every month. If the mortgagor runs into any kind of financial trouble, it can be a huge burden.
Here's the scary part. In October last year, Shelter revealed that over a million people had been forced to pay their mortgage or rent with a credit card in the previous 12 months. Just eight months later, that number had quadrupled – published in June 2008, Shelter's ‘Breaking point' report revealed that ‘4.1 million households (16%) used credit cards to help meet their housing costs in the last 12 months'.
Credit cards may seem like a good way to deal with a cash shortfall in the short term, but they're no long-term debt solution. "When someone pays a month's mortgage or rent with their credit card, they're not solving their debt problems – they're just putting them off," says a spokesperson for financial solutions company Think Money. "They'll have to repay that debt sooner or later, and the longer they leave it sitting on their credit card, the more they'll end up paying in interest."
What's more, any inability to pay essential bills like rent or mortgage could mean there's something seriously wrong with their financial situation in general. "Anyone in this situation should immediately review their financial situation and figure out where the problem lies. It could be that they can't really afford the mortgage / rent payments, or it could be that their other debts and expenses are simply taking up too much of their income. Unless they're certain that it's a short-term problem (caused by a one-off expense, perhaps) it's essential they take action to regain control of their finances."
The important thing is to act swiftly, but not panic and grab the first debt ‘solution' that comes to mind, like using a credit card for this kind of debt payment. "Financial solutions companies like Think Money can help people find a much better answer to their debt problems. A debt management plan, IVA or Trust Deed could be a good way to reduce their monthly payments and regain control of their finances, but everyone's situation is different, so it's vital to seek debt advice from a company that offers a wide range of debt solutions."
You can read more about ways to get out of debt on the ThinkMoney.com website.
Source:www.isnare.com |
