Personal loans best for consolidation, expert says

Mon, 04 Feb 2008

Anyone looking for a consolidation loan should opt for a personal loan, rather than a secured one.

That's the view of Rachel Lacey, editor of Moneywise.

She explained that people looking for a consolidation loan should not secure it against their property as their house would then be at risk if they did not keep up repayments .

For this reason, she went on, the best option was a personal loan, but, Ms Lacey added, it was important that people did not then incur further debts .

She said: "It's no good consolidating all your credit cards and all your existing loans onto one personal loan just to carry on borrowing and using your overdraft and taking out another credit card ."

Research from uSwitch revealed that total UK personal debt stands at around £1.39 billion.

It also found that 65 per cent of people with a consolidation loan did not cancel things such as credit cards and ended up taking out, on average, a further £2,300 of debt.
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