Consumers Advised to Consider the Suitability of Consolidation Loans
With UK consumers being constantly bombarded with advertising extolling the virtues of debt consolidation loans, it's no surprise to learn that 28% of UK consumers have consolidated their debt by taking out a personal loan. However, one expert has urged those considering taking out a debt consolidation loan to "carefully" consider if this type of loan is suitable.
Any benefits gained from using a loan to consolidate debts are soon negated if further spending is supported through further borrowing. The research from Moneysupermarket.com revealed that 8.5 million of 13 million UK consumers who favoured this method of debt consolidation, actually continued to borrow either through an existing overdraft or another loan. Some continue to use their credit cards adding further to their debt burden.
Tim Moss, head of loans and debt at the online comparison site, said: "Taking out a personal loan to consolidate debts can be a useful way for people to get their finances under control, but a loan for these purposes should be considered carefully and only regarded as a measure for becoming debt-free, not as a license to go spending again."
Mr Moss also pointed out that although many in the UK are accustomed to debt it is vitally important that they resist the lure of easily obtainable credit to ensure they don't end up with more personal debt than they can afford.
Sainsbury's Bank had earlier predicted that 433,800 personal loans would be taken out between January and March of this year by consumers looking to consolidate their existing debt. The bank estimated that these loans would total a staggering £4.8 billion.
These types of loans will only benefit consumers as long as they resist borrowing further or consider themselves out of the debt pit. Financial discipline exercised after taking out a consolidation loan will help eradicate your personal debt in the long run.
19th February 2007
So you want start rebuilding the financial mess that you are in at the moment by consolidating all the loans and debt that you currently have. But what to do when you have bad credit and the debt consolidation company will not even lend to you?
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