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Brokers `should explain debt consolidation options to clients`

20/06/2007

Brokers have a responsibility to suggest a range of debt consolidation options for clients who want financial solutions, it has been suggested.

Writing in Mortgage Solutions, Steve Walker, managing director of Promise Finance, said that remortgaging, taking out a secured loan and entering into an individual voluntary arrangement (IVA) should all be taken into account for a person`s particular situation.

He called debt consolidation a "popular solution", citing figures which state that the average consolidation loan is over eight years and the typical amount borrowed is £16,459.

"It can … make perfectly good sense to roll up several expensive debts into one more affordable monthly payment, when faced with a myriad of claims on money.

"By offering an ethical and cost-effective way to manage the repayment of debts to multiple unsecured creditors, intermediaries can provide an invaluable service to clients."

However, the pros and cons of different options, including IVAs, should be explained thoroughly, he added.

A total of three out of five people who take out consolidation loans continue to accrue debt, according to Credit Action.

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