Stall The Ball

Since I am currently experiencing some issues with our wireless broadband (the antennae took a nose dive after a lightning strike nearby) I spent last night channel surfing on the TV. Not a past time I usually indulge in.

Follow up:

What struck me as we watched the various DIY/makeover shows was the sheer number of loan consolidation ads on TV. In some ad breaks it was wall to wall. One in particular, hosted/presented by Carol Vorderman of countdown fame really got my goat. Here is a lady who is world famous for her attributes, mathematical that is, selling people on the idea that you can solve all your problems by taking all your debts, credit cards repayments, car loans etc and consolidating them into one huge payment.

Now I’m no mathematical expert but it strikes me that by the time you pay whatever fees are applied, calculate the interest repayments over a longer term and take into account the punitive interest rates charged by suboptimal lenders in the long run you are going to pay a lot lot more. In Ireland credit card interest rates are extortionate. 17 to 21 percent are not uncommon. So for someone with a huge credit card bill hanging over them it is very tempting. But consider this. Right now you can apply to most credit card companies in Ireland for a new card and as part of the deal they will move your balance to the new card, waive interest in some cases for up to 6 months or offer a reduced interest rate.

What really concerns me about these types of offers is where someone who has lost control of their spending, and lets face it happens to all of us at some point in our life, consolidates their loan, clears credit cards and proceeds to rack up more dept on their card once it is cleared. Now you are in a real pickle. Not only do you have massive credit card debt, but you also have this consolidated loan as well with probably little chance of reconsolidating it again. Then there are the folks straight out of college, little work or earnings history, no house and being told that college loan consolidation is THE way to go. Let’s put this in perspective. You have no equity. You have no earnings history. You are on the bottom rung of your earning potential. You are not likely to die of old age before repaying your debt. Talk about a target rich environment.

Surely Miss Vorderman is capable of calculating the interest rates and total costs of the loans much better than I. Don’t forget that in a lot of cases these loans are being secured on your property so you are putting your house at risk as well. Do a Google on www.google.ie for loan consolidation. Way down the list appear organisations like Citizens Advice Bureau or The Money Advice and Budgeting Service (MABS). These are free services designed to help people with monetary issues. I’ll say it again, they are free. They don’t charge fees. They are well connected to lenders and most Irish lenders look favourably on applicants referred to them through these agencies as it shows that someone is taking control of their funds.

If you are considering going down the route of debt consolidation contact the above services first. They don’t make commission from your plight, they don’t have any commercial axe to grind and they do actually try and help you rather than postpone the inevitable.

Personally, I think usury laws should be widened to encompass loan offers that claim to cost you less but end up charging more, include so called “fees” that drive the total cost of the loan far beyond the current legal limit of interest charges and misrepresent their products.

EDIT
It appears I am not alone. The Guardian carried a story about debt charities petitioning to Ms Vorderman to stop endorsing secured loans from First- Plus.

But debt campaigners say the loans are unsuitable for the vast majority of individuals, even those in significant debt, and that celebrities such as Ms Vorderman have normalised loans that should only be taken "as a last resort".

Which magazine also has an article covering the incident.

Which? first raised the issue back in 2001 when reader Graham Newberry took out a loan with FirstPlus after seeing a television advert for the company featuring Vorderman.

He had to pay fees and interest of GBP 9,500 despite paying off the loan early.