Two thirds of people who consolidate their debts with a loan will then go on to develop even more debt
Two thirds of people who consolidate their debts with a loan will then go on to develop even more debt according to latest findings.
The research by moneysupermarket found that one in four Brits (28 per cent) have taken out a loan to consolidate their debts, but then 66 per cent of these will accumulate further debts by using overdrafts, credit cards and additional loans.
The study also found that nearly a third (31 per cent) of consolidators feel trapped by their debts, and over a quarter (26 per cent) admitted that they will always be in debt.
Moneysupermarket’s Tim Moss says: “Debt has become the common curse of modern times. People need to be careful that the ease of getting credit doesn’t catch them out.
“Forty years ago, being in the red was a last resort. It seems many of today’s Brits are much more accustomed to taking on debt – although being able to control it is quite another thing.”
Chiltern’s Joanne Gill says: “Too often after taking a consolidation loan, people are spending on the balances they have just cleared which will accelerate the downward spiral of debt.
“Consolidating debts is one option to regain control of finances but should be done cautiously. Borrowers need to understand it doesn’t mean they can then spend again on the balances that have just been cleared.
“With banks tightening their lending criteria and interest rates increasing, this option may not be available to many and they will be forced to seek other alternatives.
“If people are struggling to keep up with their finances it’s better to seek independent and impartial advice from trained professionals offering a range of solutions.”