Debt consolidation loans could be an option for those resorting to payday loans

Debt consolidation loans could be an option for Brits who consistently rely on payday loans to bridge the gap between being paid.

That is because obtaining payday loans could lead to a spiral of debt as some providers charge extortionate rates of interest, meaning consumers pay a lot more back than they originally borrowed.

David Rodger, managing director of the Debt Advice Foundation, which is a UK charity, stated that more consumers are resorting to these loans as high street lenders have tightened their criteria.

"Once a payday loan has been taken out, often due to income shock or significant unplanned expenditure, some people, particularly those on low incomes, might feel the need to supplement their income with further loans to help them meet their basic living costs and loan repayments," he said.

This could mean that Brits borrow too much as it is a cycle they cannot get out of, which may lead to debt problems.

If this is the case then there are plenty of debt solutions available to them. Brits can gain more information about each of them on the Money Expert website.

One solution could be a debt consolidation loan which lumps together outstanding debts into affordable monthly repayments.

These loans tend to have less interest than the original debt, meaning it can be paid off quicker but they are hard to obtain if you have a poor credit rating.

Another solution is an Individual Voluntary Arrangement (IVA). This is an informal but legal agreement between a borrower and their creditors.

The debtor pays back how much they can afford each month for the term of the IVA, which tends to be five years. If the debt has not been repaid in this time it will be written off.

A recent report by Work Wise UK found that consumers in Wales and the north-west of England are being hit by unemployment the hardest, meaning they may need debt help in the future.

 

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