Borrowers Urged to Repay Payday Loans Before Personal Loans

Mon, 07 Dec 2009

With consumers paying off debts more eagerly than they have done for 16 years, borrowers are being advised to ensure they are repaying the right forms of debt . September to October saw the biggest fall in borrowing since records began in 1993, after banks tightened credit controls meaning it is harder to borrowers to secure further loans .

It certainly makes sense to pay off debts at present given that interest rates on savings accounts are so miserly. However, consumers are being advised to ensure they are repaying the correct debts. The amount outstanding on unsecured loans fell by £713 million in October, including sums owed on personal loans, car loans and hire purchase agreements.

While it is always good to lower the amount you owe, an increase in credit card debt of £134 million over the same period has sparked fears that borrowers are being forced to repay their relatively cheap loans, and are replacing them with more expensive forms of credit such as credit cards or payday loans .

Therefore, borrowers have been urged to repay their most expensive forms of debt first, to avoid their repayments spiralling.
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