People planning to use consolidation loans 'need discipline'
Published On 2 April 2008
Consumers who plan to consolidate their debts with a loan need to be disciplined with their repayments, an industry expert has said.David Kuo, head of personal finance at fool.co.uk, said that a recent study had shown that around 40 per cent of people applying for personal loans plan to use the money to consolidate their debts.
He added that a single loan could be a good idea for people with "a myriad of claims on your money" as it meant there was only "one affordable monthly payment" to worry about.
However, he warned: "While consolidation loans can be a welcome lifeline, you need great discipline to stop it from being a noose around your neck."
In addition, Mr Kuo pointed out that "now is probably not the best time to take out a loan".
"With banks competing strongly with each other to attract money, consumers should take advantage of the high savings rates by delaying purchases and putting money away instead," he concluded.
Mr Kuo's views echoed a recent study by MoneyExpert.com which showed that the average rate on all unsecured personal loans has increased from 10.62 per cent to 11.4 per cent since the beginning of the year.
