Discipline Needed When Taking Out Consolidation Loans

Wed, 02 Apr 2008

UK consumers who plan on taking out a loan to consolidate their debts need to be disciplined with their repayments, an industry expert has warned.

David Kuo, head of personal finance at website fool.co.uk, said that a recent study had revealed that around 40 per cent of Brits applying for personal loans were doing so in order to use the money for debt consolidation .

Kuo explained that a single loan could be a good solution for people with "a myriad of claims on your money" as it meant that they would only have to worry about making "one affordable monthly payment".

But the finance expert warned that although "consolidation loans can be a welcome lifeline", consumers require "great discipline to stop it from being a noose around your neck".

"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 comments were backed up by a recent study by MoneyExpert.com, which found 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 2008.
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