Debt Free Direct Back Sharp Decline in Borrowers Using Loans for Debt Consolidation

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Recent figures released this week from Sainsbury's finance show that numerous individuals are choosing to avoid loans for debt consolidation, a finding backed by Derek Oakley, Insolvency Director at Debt Free Direct.

We recommend that anyone considering taking out a consolidation loan to manage a debt problem seeks professional financial advice. It is rarely advisable to borrow your way out of debt.

Statistics released this week have shown a sharp decline in UK consumers using personal loans for debt consolidation over the past two years. The report, by Sainsbury’s Finance, states this may indicate many people are choosing to pay off their outstanding debts, rather than consolidate.

Figures from Sainsbury’s finance show that in 2007, £1 in every £13 borrowed by Sainsbury’s Finance personal loans customers was solely for debt consolidation purposes. 2008 saw this figure drop to £1 in every £19, with the figure falling again in 2009 to £1 in every £50.

According to the figures, the majority of personal loans are taken out for more domestic reasons such as home improvements or buying a new car, however there are still portions who take out a loan to fund a more unusual expenditure, such as cosmetic surgery.

Derek Oakley, Insolvency Director at Debt Free Direct said, “Using personal loans for debt consolidation has been common practice in the UK for many years, But there are many debt solutions available for an individual depending on their situation. We recommend that anyone considering taking out a consolidation loan to manage a debt problem seeks professional financial advice. It is rarely advisable to borrow your way out of debt”

For those with multiple debts to several creditors, using a personal loan to consolidate the debts can potentially reduce the interest rate for the debtor. However, there are many debt solutions available for those in the United Kingdom with multiple debts including Individual Voluntary Arrangements (IVA) and Debt Management Plans (DMP).

Bank of England statistics also support these new figures from Sainsbury’s Finance, showing that for five consecutive months in the latter half of 2009, repayments outstripped new unsecured consumer credit. These new figures are thought to be an indication that the difficult economic climate has led debt-conscious consumers to start a new approach to their finances.

Derek Oakley is Insolvency Director at Debt Free Direct, the UK’s number one provider of Individual Voluntary Arrangements (IVA). Debt Free Direct provide a free debt advice help line and are committed to providing honest, independent and confidential debt advice. Over a thousand people a week are advised on different debt solutions such as IVA and Debt Management Plans by trained Debt Free Direct advisors.

For more information on the debt solutions available in the United Kingdom, visit the Debt Free Direct website at http://www.debtfreedirect.co.uk.

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