Alternatives for borrowing during the credit crunch
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| Stressed man (c) Rex Pictures |
1. Manage your money better
Personal loans make up the biggest portion of debt in the UK. An estimated 12 million people have £66bn-worth of personal loans outstanding in the UK, according to MoneyExpert.com – that’s twice the amount of debt on credit cards, and six times that on overdrafts.
With two out of every three personal loans taken out to consolidate other debts, according to MoneyExpert.com, they can be seen as more manageable. But with decent organisation there’s no reason why a credit card and overdraft can’t be used to give you access to fresh funds.
Almost all credit cards offer direct debit repayments, and overdrafts simply require you to check your balance regularly to avoid being stung – so you should be able to make sure you pay on time and don’t go over your limit.
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2. Take out a secured loan
If you’re unable to get an unsecured personal loan, you may still be able to get approval for a secured loan. This has some of your property, such as your home, held by the lender as security for the amount you’ve borrowed.
However, the secured loan market has also been feeling the pinch. “Eight lenders including Alliance & Leicester, Money Partners and Picture Financial have all stopped offering secured loans in the last few months,” says Michelle Slade from Moneyfacts.
Rates are also rising. While you could have got a secured loan with an interest rate as low as 5.9% in March 2007, the best deal now on the table is with Sterling Credit for a loan for £5,000 to £75,000 over three to 25 years at 6.8%.
Also beware that most secured personal loans have high set-up fees.
