Expert warns against homeowner loans
(06 February 2008)

Unsecured loans are a much better option than a homeowner loan for people wanting to consolidate their debt, according to an expert.

Moneywise has advised people to avoid any loan secured on their home even if it does offer a better interest rate.

Rachel Lacey, editor of Moneywise, said: "If you're looking at debt consolidation, what you really, really don't want to look at is a secured or homeowner loan, because if you don't keep repayments up then your home is at risk."

Ms Lacey also advised consumers to shop around the market to get the best interest rate.

"The rates are still looking reasonably good - you can easily get something under seven per cent."

She warned against taking the advertised loan rate as a definite, as this can change depending on circumstances giving a lot of people higher rates.

Personal loans can be ideal for debt consolidation but only if the person stops borrowing money and pays off the debt every month, Ms Lacey warned.

UK consumers are currently paying £93 million in interest on credit cards, loans, overdrafts and mortgages, according to research by uSwitch.