Large quantities of people across Ireland are now taking out fresh loans in an effort to pay down car finance agreements, credit card bills and credit union loans.
New figures released also demonstrate that a large number of people are remortgaging to pay for home improvements in spite of rising interest rates and growing international turmoil based around the global credit crunch.
Referred to as debt consolidation, this remortgaging to pay off debts has been growing steadily despite a slowdown in all other home-loan applications..
But recently, organisations such as Myvesta Ireland, MABS and the Financial Regulator have warned consumers to think long and hard before consolidating debts into a new mortgage agreement.
The financial regulator has also warned that it often ends up being more expensive to consolidate debts as it takes longer to pay off new mortgages. Debt consolidation is commonplace in the United States and the UK where traditionally credit markets are more mature and people have been more exposed to debt consolidation loans through heavy advertising. In both the UK and USA though many people choose not to take out further borrowing and instead prefer to seek debt advice and enroll onto an informal debt repayment scheme negotiated with their creditors.
Debt repayment schemes involve prioritising the more important household bills such as mortgage or rent payments, food and housekeeping and utility bills to ensure that these priority payments are met in full. The remaining 'disposable income' is then used as the basis for negotiating with lenders to reschedule payments based on what the person can actually afford to pay each month.
Requests for reduced or frozen interest rates are made and payments are typically shared out on a pro-rata basis so that all creditors are treated fairly and equitably and receive their fair share of the persons calculated surplus income.
Source:
http://myvesta.ie/articles/articles/13/1/Irish-
Consumers-Warned-Of-Perils-Of-Debt-Consolidation-Loans/Page1.html |
