Personal loan problematic with existing debt

Mon, 24 Apr 2006

People with adverse credit problems who are considering taking out another personal loan for debt consolidation purposes are being warned that this is not always the best option.

Frances Walker, a spokesperson for the Consumer Credit Counselling Service, says that TV adverts sometimes make this type of personal loan look overly simple.

She says that there is a great deal of advertising in the tabloids and on television that promote consolidation loans.

However, she says taking out another personal loan to consolidate existing debt "could prove quite risky".

Ms Walker added that when a person has adverse credit problems, it is "generally not a good idea" to take out a debt consolidation loan.

She explains that nine times out of ten, such a loan is secured against the borrower's property.

Another credit expert is warning those with debt that if their credit situation becomes unmanageable, county court judgements (CCJs) might offer relief in extreme cases.

Stuart Glendinning of price comparison website Moneysupermarket however warns Britons that CCJs will affect future credit application.

He says that people with CCJs will find it much harder to secure a loan in the future.

"When you do get credit you will pay much more for it," Mr Glendinning warns, adding that a person with a CCJ will no longer be able to apply for the best personal loan rate.

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