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The perils of the borrowers adrift

Teachers can be led into debt by their high credit rating, warns Susannah Kirkman. Planning to take out a loan to pay for that extra-special summer holiday or cover your January sales debts? Take care, warns Steve King, an insolvency practitioner who spends much of his time steering teachers away from the bankruptcy courts.

He says teachers are prime targets for personal loan and credit companies. "In a teacher's family, often both partners are working in education and their credit rating will be triple A," he explained. "The level of debt among teachers who have taken out loans is quite high."

One loan company, which offers debt consolidation secured against your home, says applications have increased by 20 per cent over the past year. The National Consumer Council, however, suggests a teacher in employment should attempt to borrow from their bank or mortgage lender before trying a loan company. When you're choosing your lender, the rule is, the bigger the better. "If they're a small company, they won't be able to make many allowances for people who fall into arrears," cautioned David McNeill of the NCC.

He warns that debt consolidation - paying off all your debts by taking out another loan - is a non-starter. "You can't borrow your way out of debt. With these loans you are paying interest on interest."

Another problem is that less scrupulous loan companies will then encourage you to take out a further loan on a car or holiday, even though they are fully aware of your depleted credit status. A straw poll among companies advertising in The TES revealed that most teachers take out loans for new cars, holidays and home improvements.

Mr King points out that a reliable car is usually essential to any teacher, and that promotions often involve moving and spending money on a new house. Teachers also seek loans to finance themselves while they're studying for an extra degree, he says.

And children in higher education may be another drain on resources; teachers are more likely than other professionals to spend money on their offspring's education, claims Mr King, whether it's music lessons or seeing them through university.

Unfortunately, education cuts mean that many teachers can no longer keep up their loan repayments. Reductions in hours for part-timers and, indeed, full-blown redundancy, make teachers less of a boon for the credit companies. Mr King is dealing with increasing numbers of redundant college lecturers, and with private school owners who are trying to restructure business debts to keep their schools open.

So what should you do if your debts have spiralled completely out of control? The NCC advises teachers to seek independent advice as quickly as possible. "People who are advertising solutions to serious debt should always be treated with caution," urged David McNeill.

The Citizens' Advice Bureau and some teaching unions and local authorities offer debt counselling; they can put you in touch with independent insolvency practitioners, usually working in advice centres or law centres, who will "restructure" your debts without charging you the earth. The insolvency practitioner can bring all your creditors together and arrange for you to pay off your debt at a rate you can afford.

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