"Financing projects from £50,000 to £100 million"

Educate stricken borrowers, says new specialist lender

Educate stricken borrowers, says new specialist lender

Magellan Homeloans says the financial services industry should look to the example of speeding awareness courses and develop a similar course aimed at those who struggle to pay back loans.

The credit repair lender, which helps borrowers that have come unstuck as a result of redundancy, divorce or illness, says the industry needs to work on educating those who encounter difficulties rather than leading with damaging fines.

Magellan believes that the success of speeding awareness courses as an alternative to penalty points could form an ideal model for educating borrowers who end up in serious debt.

Mark Snape, the firm’s managing director of lending, said that “the overwhelming majority” of borrowers had “a genuine intent to repay”, and that they were often left in trouble following an unexpected event.

Because of this, it could be beneficial to provide education in the first instance rather than imposing further fines and CCJs, he said, which had serious long-term consequences for the borrower.

Under the proposed system, courts would have the option to offer stricken individuals the chance of attending a financial awareness course. Any further defaults on future payments would then result in a mandatory CCJ.

Mr Snape explained: "To date, the financial services industry has tended to fine and punish borrowers who get into financial difficulties with penalties and CCJs, rather than provide help through education and rehabilitation.

"However, if you consider the approach the police have taken to speeding offences, they have found that offering speed awareness courses as an alternative to penalty points has been an extremely effective way to change driving habits. The financial services industry can learn from this experience.

"The threat of a CCJ is a salutary wake-up call and the opportunity to attend a financial awareness course may have a more beneficial effect than simply giving someone an adverse credit record, which usually prevents them from taking out another loan for up to 6 years.

"It’s our firm belief that education and rehabilitation has to be a better approach that fining and pushing."

Monday, 14 April 2014 12:59
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