Customers who choose to make an affordability claim against their lender will be aware of the risks and benefits of doing so. If a claim is successful, then the reward is getting back the interest charges on lending that was irresponsibly given. But, do you want another loan from the lender you are claiming against? Well, it should not come as a surprise if the lender refuses to give you another loan – following your allegations against the lender of irresponsible lending. But taking a step back, do you really want that new loan? Do you need that new loan?
Free government advice
Whilst Allegiant can help you with your affordability claim, we are not experts in giving general financial advice.
As an example of free guidance, Citizens Advice gives assistance for those who are thinking about borrowing money to pay bills. It points out that you should first contact the organisations you need to pay, as you might be able to agree a plan to pay your bills without the need for a loan.
For essential items, some people are eligible to take out a ‘Budgeting Loan’ – which is interest-free, so you will only pay back what you borrowed.
There is also free advice available about escaping mounting levels of debt. And rarely is the right answer to take out further borrowing to try and manage the debt.
A habit to fill a hole…
It is clear that some customers build up long-lasting relationships with lenders, for example doorstep agents – who promise more and more loans for those who struggle to pay the previous loans. It is not unusual for customers to take out dozens of loans in a row. It is fair to say that borrowing money has become a habit – a regular supplement to normal income – where any specific purpose for borrowing money in the first place has been lost along the way.
This is a dangerous situation to be in: it is not sustainable to be in constant debt due to taking out expensive credit. In this situation many people will find it much more beneficial, in the long-term, to stop borrowing money and instead think about how to budget their outgoings based on their regular income.
The vicious circle of borrowing more money to fill a hole left by having to pay back a previous loan is commonplace. Some people talk of being in a ‘debt spiral’ – a vicious circle…going down and down.
In upholding a complaint about unaffordable lending, an Ombudsman summarised the situation many people find themselves in with a lender:
“All of the above were clear indicators of Mrs B being in a difficult financial position. The overall pattern of lending, where Mrs B was advanced funds shortly after making payments suggests that Mrs B was having to borrow further funds to cover the hole left in her finances by making payments to these loans.”
Mrs B was trapped in a cycle of repeat borrowing. Has borrowing money become a habit for you too?