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Would You Credit It?

February 3, 2012

During these unstable times, more people are being forced to take a good look at their own personal financial situations and make sensible decisions about where their money is going each month. Although many people use comparison sites to choose the best deals on financial products and services, recent research has shown that almost a million people are using payday-loan companies to help them cover important monthly expenses such as their mortgage or rent payments.

A further 6 million people are using credit as a way of paying regular monthly outgoings, such as credit cards, overdrafts or loans. For many people, making use of credit is the only way they can make ends meet each month, but experts have been quick to say that this behavior could lead to further trouble.

Is a Quick Fix Really a Good Idea?

There has recently been an increase in the number of payday lenders offering substantial amounts of money quickly and easily. These types of loans can be useful for unexpected costs that may come out of the blue and leave your monthly budget stretched too far. Being able to borrow a small amount of money as a one-off can be helpful in making ends meet. However, the danger comes when borrowers start using the loans regularly.

These unsecured loans generally come with high interest rates attached and when used every month can lead to unsustainable repayments. Building up additional interest each month can leave people struggling financially.

Likewise, using credit to make your payment will incur extra interest charges, which is essentially making each monthly payment you make more and more expensive each month.

What’s the Alternative?

If, as many people are, you are struggling with debt, make sure you get some financial advice before turning to payday lenders, unsecured loans or credit as a way of covering important payments. If you are finding it hard to pay your monthly mortgage payment, talk to your lender and explain your situation.

Some mortgages allow for payment holidays. If you are having problems, these can often help you to reorganize your finances. You could use the money saved during the payment holiday to pay off other short-term debt that comes with much higher interest rates.

There are many sensible options that can help you get back on your feet without going to the extremes of building up more debt. Make use of comparison sites to find the best deals on financial products, from a better mortgage rate to credit cards with 0% interest offers. Never bury your head in the sand and hope that your debt will go away. The only way you can get out of debt is to consider all your options and take control of your life.

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