EDINBURGH, SCOTLAND (PRWEB) November 12, 2014
Simple Financial Solutions has released a new study that reveals that almost all of its debt advice cases are composed of some form of consolidated loan, echoing recent concerns by the Citizens Advice Scotland about the impact of roll-over loans on personal finances, leading many into IVA’s and other similar debt schemes.
This is no surprise to CAS, who believe many lenders encourage these roll-overs this is a direct cause of the growth of personal debt mountain.
Citizens Advice Scotland’s chief executive Margaret Lynch said: “Sadly, ‘roll-over’ loans are a problem in the debt cases we see in the CAB. The pattern is very familiar. You are short of money one month, so you take out a quick payday loan, but the interest rates are so high you soon find can’t repay it, so you have to take out another loan to pay it off, and then another one to repay that one.” The full article can be read here.
However it’s not just payday loans that encourage rolling over unaffordable debt. Traditional loans are also being used to consolidate debts with credit cards and overdrafts.
A spokesperson for Simple Financial Solutions said: “Once someone starts consolidating debt and rolling over loans they are on a very slippery slope. People are usually optimistic about their ability to pay off a new rolled or consolidated loan when they take them out, but unfortunately the reasons behind why they needed to do so is very rarely addressed.”
“Almost every person in debt who has come to SimpleFS.co.uk for help has had at least one consolidated or roll-over loan in the past.”
Of particular concern to the industry is the deliberate selling of roll-over loans to people already in financial trouble.
“One of the worst aspects of this is that some lenders deliberately target vulnerable people with roll-over loans,” said Margaret . “For example, a customer contacts the company to say they can’t make a payment, and the company responds by offering them another loan. This is the sort of thing that we need to stamp out.”
Simple Financial Solutions provides advice on the Individual Voluntary Arrangements debt solution.