If you have unsecured debt it's better to pay it off when you can so as to be able to get hold of secured, cheaper debt when the time is right.

Figures released by the Bank of England have shown that in November, borrowers repaid £376m of unsecured debt and while that was £215m less than the total repaid in October, it's good to see that people are trying to pay off unsecured debt rather than amass it.

Howard Archer, chief UK and Eurozone economist at IHS Global Insight, says: "The fifth successive net repayment in consumer credit in November is clearly the consequence of many consumers` desire to reduce their debt. It is yet another example of consumers looking to improve their financial situations in the current difficult and worrying economic environment."

If you have unsecured debt problems, lenders cannot trust you to be able to pay off secured debt. In their eyes they see someone who has taken short-term solutions instead of thinking carefully and saving instead of borrowing. Too much credit card debt, store cards and personal loans points to a borrower who may not be able to deal with a bigger, long-term loan.

Talk to a financial professional about working off your unsecured debt, either through sensible budgeting or through secured debt consolidation to allow you to become a better potential borrower. The person who has worked off debt, budgeted wisely and has listened to sage advice is the person who will be accepted for future secured loans and mortgages.

SOURCE: IHS, BoE, 07/01/10

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