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Not all consumers are helping themselves with consolidation loans

Recent data has shown that some consumers are making their already worrying financial situation even worse by taking out a consolidation loan to pay off all of their smaller debts, but then failing to close other accounts and re-spending on them, placing them in an even higher level of debt than they were in before consolidating their finances.

This comes to light as the current level of consumer debt is found to have increased by over two hundred percent over the last thirteen years.

The statistics come from consumer debt group Credit Action, and indicates that consumer debt has risen to a massive £1.3 trillion. It seems that even many of those trying to get a grip on their finances by taking out a consolidation loan to wrap up smaller, high interest debts such as credit cards and store cards and then going on to re-use the credit and store cards rather than close the accounts, thus placing themselves in even more debt than they were in originally.

One personal finance director from price comparison site stated: "With Britain's personal debt levels increasing by £1 million every four minutes, it is clear consumers need to take some personal responsibility and carefully manage their own financial situation." Uswitch also added that it seemed that people were no effectively planning their finances, which was resulting in many peoples’ finances spiraling out of control and becoming unmanageable.

The massive levels of consumer debt in the UK have also led to many people turning to bankruptcy and IVAs in order to get themselves out of debt. Banks have reported massive bad debts for 2006, and the number of people going for insolvency has reached record levels at over one hundred thousand people opting for bankruptcy or IVAs in 2006.

Alisdair Milton
31st December 2006


More Information:

  • General Loan Advice For Managing Debt
    Debt is a really easy thing to get stuck in. Even if you are not extravagant monthly costs can spiral out of control, especially if you take your eye off the ball. So what can you do to avoid getting too far into debt and if you are there already how can you get out of it?
  • Managing your debts
    It is easy for debt to get out of control. Student loans, losing your job, becoming ill or any number of other unforeseen events can easily cause debts to mount up.
  • Consolidating Debts with a Loan
    If it seems advertisements for debt consolidation loans are everywhere, it is because consolidated loans are big business. The primary reason for people taking out personal loans over the next year will be for debt consolidation.
  • What Happens if I Can’t Pay the Debt Consolidation Loan?
    If you have a debt consolidation loan what would happen if you can't pay? This article gives some scenarios and some practical advice.
  • What is the Role of Debt Consolidation Companies?
    There are many forms of lender on the market. Not all of them are banks. Debt consolidations companies play a specific role in the debt market.


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