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Unsecured loans at highest level since 2008

In fact, unsecured lending is growing at a rate not seen for almost a decade, reaching the levels witnessed before the financial crisis of 2008.

The Bank of England has revealed concerns about the rising amount of consumer credit – principally unsecured loans and credit cards.

With the possibility of the BoE introducing measures to slow down borrowing, either by tightening the lending criteria for unsecured loans or raising interest rates, debt charities like the National Debtline are urging households to try and clear as many of their debts as possible. If the expected changes come into effect, households will be hit with much higher monthly payments and fewer options to spread or defer the costs. In fact, if interest rates increase from the present 0.5% to 2%, the average household will have to find an extra £2,000 a year to meet their debt obligations.

Many experts the interest rises will arrive at the same time as the Government’s delayed plans to remove tax credits will be taking another £1,000 a year off working families, putting even more pressure on already-stretched household budgets. It’s particularly worrying for younger homeowners who have never experienced higher interest rates, and for mortgage holders who are relying on benefits.

One way to defuse this potential problem would be to consolidate your existing unsecured business loans or car loans now with a secured loan. These allow you to borrow over a longer period, meaning you can keep your repayments lower than on a short term loan and you getting a fixed rate now would reduce the impact of rising interest rates.

Simply planning a budget that details all your income and outgoings, and allowing a safety margin for any potential rises in your mortgage costs, will help you work out how much you could afford to borrow. And the convenience of a single loan payment every month would make it a lot simpler to keep track of your finances.

Of course, you should think very carefully about securing any debts and against your home, as failure to keep up with payments could put your house at risk. But if you have a lot of debt that you will struggle to manage in the coming years, acting now to bring down your payments could spare you a lot of financial discomfort further down the line. 

http://www.ft.com/cms/s/0/3dd5129c-9747-11e5-9228-87e603d47bdc.html#axzz3t5NfoNXi
http://www.express.co.uk/finance/personalfinance/618181/UK-houshold-debt-brewing-the-perfect-storm-when-interest-rates-rise
http://www.bloomberg.com/news/articles/2015-11-30/bank-of-england-worries-from-property-to-debt-may-need-action


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