Brits jumping straight back into the red
Almost two out of three people who take out a loan to consolidate their debts go on to borrow more while still repaying that loan, according to Moneysupermarket.
With the cost of essentials, such as food, fuel and electricity, rising in price the fastest, more and more people are finding it hard to cope financially. One in nine borrowers say they feel unable to do anything about their debt, while a further 10% say they feel their debt is spiralling out of control.
Despite so many people going on to build up further debt after consolidating, 44% would consider consolidating their debt again, showing it is often not a one-off solution.
Tim Moss, head of loans at Moneysupermarket, said: “I am shocked so many people are plunging themselves into a further debt sentence via the very mechanism they’ve used to help reorganise their finances.
“Many people’s finances are being stretched to breaking point by the spiralling cost of living and the credit crunch. But don’t bury your head in the quick sand of debt. No matter how much providers lend you, you can’t borrow your way out of it.
“Debt consolidation has its place, being a good way of managing multiple debts by lowering monthly outgoings. But to succeed, those people who consolidate their debts need to be extremely disciplined and resist the urge to borrow anything further. It is the only way to break this vicious cycle of borrowing.
“I urge people who feel their debt is running away from them to seek advice sooner rather than later, and certainly before signing up for a further loan.”