Tackling your debts

Borrowing to pay the lender

Posted 09 October 2013

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Two million people who are taking out new loans to stay on top of old ones could be making their financial problems even worse.

Two million people in the UK could be at the top of a very slippery slope.


They are the people who, according to our research, have taken out payday loans and other types of credit so they can meet repayments on other loans.


A survey of more than 2,200 people by Debt Advisory Centre has found that 4% borrowed money to repay other debt in July. The numbers are even worse for younger age groups: 7% of those aged 25 to 44 admitted they had borrowed to repay - more than double the proportion for any other age group.

The not-so-easy way out

It easy to see how it happens. You reach that stage in the month when your cash is about to run out, but payments on loans or credit cards are about to become due.


It may seem a good idea to borrow money rather than face the penalties that some banks and credit card companies charge if you miss a payment. And with some kinds of credit available almost instantly, what could be easier than taking out some money for a few weeks to tide you over?

Why this is such a bad idea

All too often, borrowing money to make a payment just makes your financial problems worse. You are already paying interest on your original loans, and if you borrow more money to make a repayment, you'll have charges and interest on the new loan to think about too.


You end up with even bigger money problems, and at some stage you won’t be able to borrow any more.


Ask yourself - if you can’t afford to meet the repayments on your debts this month, will you really be able to afford them, plus extra for the new loan, next month?

Can borrowing ever help?

Sometimes, borrowing can help. A debt consolidation loan is a new loan that people use to pay off their old debts entirely - replacing multiple debts with just one (the debt consolidation loan).

This can be a way to simplify their finances.

Even so, it's not without its risks. If they arrange to repay their loan more slowly, it can reduce their monthly costs - but it can cost them more in the long run, since they'll be paying interest for longer.


Plus, consolidation loans are often secured against property, which means they could be putting their home at risk if they don't keep up with their payments. If you'd like to know more, you could take a look at the 'debt consolidation loan' section on our debt consolidation page.

Are you struggling to make payments?

If you're struggling with repayments, you should talk to your lenders as soon as possible. They may be willing to agree on a plan that will help you to manage the repayments over a longer timeframe. They may also agree to freezing the interest charged on the loans.


If this seems too daunting, or doesn’t produce a solution that works for you, it could be time to seek expert help.


We specialise in helping people who are struggling with debt to get back in control of their finances. Fill in the form below and a member of our team will call you to talk about your problems and find out if there's a debt solution that could help you.

by Kyri Levendi

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