Discipline needed with debt consolidation loans

Fri, 04 Apr 2008

Debt consolidation loans can be a lifeline for those struggling with debt, but people taking one out need to be disciplined, one expert has warned.

David Kuo, head of personal finance at Fool.co.uk, explained that debt consolidation loans can be helpful, but that people must be careful not to run up further debts after they take one out.

He said: "A study by Fool.co.uk showed that three out of five people who take out consolidation loans then go on to run up further debts.

"So while, consolidation loans can be a welcome lifeline, you need great discipline to stop it from being a noose around your neck."

He added that the average size of a personal loan is £7,000 and that four out of ten borrowers used the money for debt consolidation purposes.

According to the Insolvency Service, there were over 25,000 individual insolvencies in England and Wales in the second quarter of 2007.
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