According to David Kuo, head of personal finance at Motley Fool, many people are only taking on extra debt to fund such frivolities as smoking and drinking, yet risk being overcharged for such loans in the process.
“What we really want to drive home is that when people want to borrow money they should ask themselves whether they really need to borrow money. They need to look at their budget and think: ‘Can I go without a packet of cigarettes or a pint of beer?’ said Mr Kuo, urging good debt management.
His comments follow a two-year probe into the home-credit lending industry in which the Competition Commission told home-credit lenders that their loan costs must be made more transparent.
It also said that consumers should have the option to compare prices via a price comparison website and that rebates should be offered to those who settled their accounts early as customers were currently being overcharged by more than £75 million.
“You shouldn’t really be spending money and you have to ask yourself why you had that bad credit rating in the first place,” added Mr Kuo.
“If you are only borrowing money to go out and fund your over-lavish lifestyle then you should look at that first before you go out and borrow money.”