Tue 28th Nov, 2006
Debt Consolidation Not Free
Indebted consumers are being urged not to seek a ‘quick-fix’ solution by consolidating their debts, Citizens Advice has said. The statement was in response to a report by the BBC’s Watchdog programme, which showed that some consolidation companies were not adhering to pledges to pay off a client’s debt.
Moira Haynes, spokesperson for the organisation, said that problems could arise when consumers look for a quick solution to their problems.
She said: “I think people just need to be wary of being offered what looks like a magic wand as it may not be the right thing for them and it may actually cause them more problems than it solves.”
In fact, the advertising suggesting that “there is an instant solution and that consumer can write off all their debts” is in some degrees a false statement.
Ms Haynes also explained that if indebted customers came to the group to receive advice they would not be pushed into choosing one particular solution.
This is important for UK consumers facing debt. There are many personal loan venues that the consumer can arrange themselves, free of the debt consolidation fee, that will, in fact, accomplish the same task of eliminating debt, without putting the consumer’s lifestyle and property at dire risk.
The best method is to switch unsecured personal loans to a more affordable secured loan. However, many UK consumers overlook this option because they are uncomfortable dealing with branches, and they are unaware of the alternatives – like online brokers. The consumer’s fear of putting collateral against their loan is unfounded. If a person defaults on an unsecured loan, they are still at risk of losing their property whether it is through court action or insolvency.