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Homeowners pay mortgages with payday loans 4 January 2012
James Falla (about the author)

Almost a million people have turned to a high cost payday loan to cover their mortgage or rent in the past year, the homelessness charity Shelter has claimed.

In addition, 6 million more have used other types of credit, including unauthorised overdrafts, other loans or credit cards, to help pay their housing costs, it said.

Chief executive Campbell Robb said: "These shocking findings show the extent to which millions of households across the country are desperately struggling to keep their home. Turning to short-term payday loans to help pay for the cost of housing is totally unsustainable. It can quickly lead to debts snowballing out of control and can lead to eviction or repossession and ultimately homelessness.

James Falla, personal debt expert at beatmydebt.com said that where personal debts get out of control it is common for people to prioritise debt repayments over the rent or mortgage meaning that the only way these can be paid is by borrowing more.

"Borrowing more to fund rent or mortgage payments when you are already struggling with debt is a familure story. However the answer is not to borrow more but to focus on the root cause of the problem and takle your unsecured debt problem head on" Falla advised.

Debt solutions

If you are struggling to pay your mortgage or rent and feel the only way to cover your payments is to borrow more then it is time to review your financial circumstances.

James Falla said that debt management solutions such as debt management plans or individual voluntary arrangements can be used to resolve an unsecured debt problem and free up cash so that the rent or mortgage can be paid without the need to borrow more.

"Debt management plans and individual voluntary arrangements allow unsecured debt payments to be reduced to a managable amount. They make sure that there is always sufficient cash available to meet rent or mortgage payments" Falla said. 

Shelter said the research, based on a survey of more than 4,000 people, revealed a "spiral of debt that people are falling into in order to keep a roof over their head", and urged struggling borrowers to take advice urgently.

James Falla agrees. "If you are struggling with debt it is vital that you get advice as soon as possible. There are a number of excellent web sites and on line debt forums offering advice about debt  and speaking to reputable debt advisor is always free" he advised.

Source: The Guardian