| Debt consolidation invites over more personal loans |
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Considering a loan after a debt consolidation? That is just what people happen to be doing this year in an attempt to reduce their monthly outgoings and consolidate debts into one payment.
According to a research by Sainsbury’s Bank, the foremost reason for taking a personal loan this year has been debt consolidation, what with around 1.5 million people contemplating personal loans of around £12 billion only for current debt consolidation. This trend will also see people shifting about £11.9 billion from costly credit cards and overdrafts to more cost-effective and cheap personal loans.
As consumers try these methods to save some money on debt repayments, Sainsbury’s Bank officials warn them to be cautious while doing so lest they might be duped into taking a scheme that will eventually make them pay even more. Rachel Brereton, Sainsbury’s Bank’s loans manager explains, “When taking out a personal loan, you need to ensure that you shop around to find a competitive rate. The difference in rates on a loan of £10,000 could be as high as eight per cent which over five years could mean around £2,180 in excess interest repayments." Northern Rock and Barclaycard Loans offer personal loans for an attractive 5.7 per cent.
One more thing that customers need to remember is that shifting expensive debts of credit cards and overdrafts to cheap personal loans does in no way imply that their debts have been ‘cleared’ or done away with. It is just that the debts have been switched to a different lender. Therefore, borrowers should be careful not to splurge and take up further debts because of a relaxed subconscious mind that believes that previous debts have been cleared.
It was also observed that personal loans were increasingly taken for car purchases, after debt consolidation, with Sainsbury's data revealing about 1.24 million loans being applied for car purchases. Meanwhile, home improvement ventures featured as the top third popular reason for taking personal loans.
Posted
on : Thu, 14 Apr 2005 00:00 GMT | Debt News
By : Mike Lawson
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