Consolidation could get difficult
Of the three million people in the UK with a consolidation loan, 65% did not close down existing forms of credit and accumulated £2,300 more in debt, according to uSwitch.
Research from the price comparison and switching service shows consumers across the UK are paying £93 billion in interest on loans, credit cards, overdrafts and mortgages. Total personal debt has now reached £1.39 trillion.
Almost one in four UK adults found their debts unmanageable last year, according to uSwitch, with 9.5 million maxing out one form of credit in the last six months. In addition, 38% have had a credit card application rejected.
Calculations from uSwitch have shown the average household debt of £4,280 could attract £1,060 in interest over 36 months. Consolidating such debts to a best buy unsecured loan could save the average household £605 over 3 years.
However, Mike Naylor, personal finance expert at uSwitch, warned: “People have enjoyed easy access to cheap credit for quite some time, but for some, the party really could be over. Anyone with multiple debts and a poor credit history could be vulnerable to the impact of the credit crunch and should seriously consider consolidation while the option is still available. The base rate reduction is a step in the right direction, but it could be too little too late for people in real financial difficulties.”