Debt consolidation personal loans warnings

Thu, 23 Feb 2006

Experts are warning those planning to take out a personal loan for debt consolidation purposes to carefully consider their options.

Debt advice charity National Debtline says it is "very wary" of recommending a personal loan to those with adverse credit problems who want to consolidate their debt.

The Citizens Advice Bureau (CAB) says those planning to take out such a personal loan should take into account how long repayment of it will take them, as well as what the total cost will amount to.

A CAB spokesperson says people with adverse credit problems should consider whether they are eligible for help from the social fund or if joining a local credit union could help them with their debt.

Debt consolidation loans is "a dangerous option", says Sue Hannums, savings manager at financial services firm AWD Chase de Vere.

Ian Barber of First Plus adds: "It is a case of swings and roundabouts with consolidation loans and you should be aware of the advantages and of course the disadvantages."

Sainsbury's Bank predicts that people who want to consolidate debt will apply for 500,000 personal loans in the first quarter of the year.

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