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According to research by MoneyExpert.com over 6 million people in the UK have opted for a debt consolidation loan over the past 3 years. That amounts to one in seven of the population, indicating just how popular these types of loans are becoming. The average value across the country for a consolidation loan is £13,000, but for some areas the value is higher with Yorkshire averaging over £16,000.
There are various views on the reason for the growth in these loans, with high levels of personal debt an obvious driver. But another contributor could be greater consumer awareness of personal finance arrangements. People now take a much closer interest in their financial affairs and with the internet providing free and ready access to competitive information, many borrowers are able to see clearly if they are paying over the odds for their loans or credit cards.
Switching existing finance to an arrangement with better interest rates is a quick way to make savings on the repayment of any existing debts, but careful consideration should be given to the whole picture, not just interest rates. Make sure switching existing finance deals will not incur any penalties than wcould offset the savings in interest. Also borrowers are encouraged to keep monthly repayment figures at affordable levels and not overstretch themselves. Some people see a debt consolidation loan as a gateway to increasing debt by reducing monthly repayments on existing debts and allowing them to borrow even more. Caution should be taken here and all borrowers should make sure they have a clear plan to become debt free as soon as possible.
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