Favouring credit commitments is a dangerous game
According to recent research, a number of financially strapped UK consumers are opting to waiver on loan repayments, prioritising “critical” credit commitments instead.
It has been revealed that 1 out of every 20 borrowers, who has suffered financially as a result of recent interest hikes are choosing to default on loan repayments in order to meet mortgage commitments.
The survey, which was conducted by a UK based loan and mortgage advisory site, suggests that consumers appear to be under the impression that loan repayments are not as important, from a financially detrimental perspective, as say a mortgage repayment. However, loans can be just as detrimental, specifically from a credit reference point of view.
Every time a consumer opts to miss a payment (also known as defaulting), a record of the incident is recorded on their personal credit file. The biggest problems arise when the consumer attempts to obtain a new credit agreement, only to be told that their application has been rejected due to a negative repayment history.
The primary reason for a person prioritising a mortgage repayment, over any other form of credit commitment, usually stems from the fact that their home could become at risk, if continuous payments were missed. Although there is logic in this type of action, it is also important for people to remember that certain loan types behave in the exact same way.
For example, a secured loan (or home loan) is issued to the borrower on the understanding that their property is used as collateral against the lend. If a borrower were to miss repayments, the lender would legally be entitled to call back the debt thus putting the person’s home at risk, in the exact same way as the original mortgage provider.
It is widely acknowledged that times have become incredibly tough for a number of people in the UK, in particular those people who live below the poverty line. Although the option of hiding from your problems can be tempting, the action of doing so will undoubtedly make a tough situation considerably worse.
If you are struggling with your credit commitments, it can sometimes be worth contacting your credit providers to explain your current situation. Failing that, you could also contact a debt charity or public service body such as the CAB.
