Don’t be fooled by debt consolidation
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| (C) Rex Pictures |
Repossessions are on the rise as more households feel the pinch. But debt consolidation isn’t always the best way to get your finances back in order – find out if a zero interest or fixed-rate card can help you
Gloomy new figures show the number of houses being repossessed has risen to an eight-year high, with about 27,100 properties being taken back by lenders in 2007. This was up 21% on 2006 and almost twice the number of repossessions in 2005.
Worryingly, experts such as the Council of Mortgage Lenders are warning that the situation could get worse over the coming year, with more people finding themselves unable to meet their debts and losing their home as a result.
While it may not have yet come to that for most people, the financial hangover of Christmas, combined with a steady increase in domestic bill levels, has left millions of households feeling the pinch.
That’s where debt consolidation companies tend to creep in. When things get tough, the number of companies trying to tempt consumers to “roll all of their debts into one handy sum” – often at a sky-high rate – seems to rise steadily.
dealing with debt
Showing no interest
Yet there are alternatives for people looking to bring down the cost of their debt.
Despite internet bank Egg’s recent decision to close 161,000 customers’ accounts, a number of providers – including, bizarrely, Egg itself – are still offering competitive 0% interest balance transfer deals.
Virgin has a 15-month 0% interest deal on balance transfers, with a 3% transfer fee, while the Halifax One card offers 0% interest for 12 months.
For those prepared to take the gamble that they won’t be thrown out at a later date, Egg offers new customers 0% interest until May 2009 with a 3% transfer fee.
But after the initial period the rates on these cards soar – up to 18%. If you know you’ll struggle to pay off your debts within a year, a card with a longer fixed-rate period or even a lifetime balance transfer rate may be a better option.
