Forward Planning Essential for Homeowners
Financial advisers are urging householders to plan well ahead in order to avoid potential pitfalls such as bad credit.
Contingency plans to cope with such potential problems as redundancy, long-term sickness or increased mortgage repayments are almost essential in the current financial climate, according to Homeowners Advice Centre co-owner Chris Jenkins. He stressed that householders should consider the potential effect of thinks like interest rate increases before they even occur.
“Questions like: ‘How would we pay the mortgage if I lost my job?’ and, ‘What would a rise in interest rates do to our finances?’ are questions that should be carefully considered,” Mr Jenkins said.
If they do suffer any ill effects, they should take immediate action to tackle the situation, rather than simply bury their head in the sand, he said – as this way would only lead them down the path of bad credit.
However, some forms of action were better than others, he stressed. For instance, a sure way to get a bad credit rating was to opt for voluntary repossession as a way to tackle increased mortgage payments or a loss of income.
In terms of future credit ratings, a potentially more desirable course of action could be taking out an unsecured personal loan, enabling debt consolidation to take place and reducing outgoings.
Recent figures have shown increased lending in the consumer credit market, with wider availability of unsecured personal loans and auto finance. The amount of debt write-offs has tailed off after reaching a peak in the last quarter of 2009, the report from Research and Market said.
However, a sustained recovery in the consumer credit market will probably not occur until 2011, researchers warned. The recovery will take place quicker in the credit card and unsecured personal loans sectors, they added.
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