Consolidation loans 'can provide a lifeline if used sensibly'
Published On 9 May 2007
Debt consolidation loans can be an effective tool for managing borrowing, but consumers must be careful that they use them wisely and resist the temptation to spend more.That's the opinion of consumer website fool.co.uk, which carried out a study of how consumers use consolidation loans.
The site found that the average length of a consolidation loan is over eight years and the typical sum borrowed is £16,459.
However, the research discovered that three out of five people taking on a debt consolidation loan go on to accumulate more debt.
"Consolidation loans aren’t necessarily a bad idea," said David Kuo, head of personal finance at the website. "After all, it can make sense to roll up several expensive debts into one affordable monthly payment if you are faced with a myriad of claims on your money.
"Consolidation loans can be a welcome lifeline for people caught in financial difficulties. But the lifeline can quickly turn into a noose if you submit to the temptation of running up further debts."
Figures from Credit Action suggest that consumer debt in the UK topped £1.3 trillion pound earlier this year.
