More struggle with debt after consolidation loan

Most people who take out a debt consolidation loan take on more debt and struggle with the consequences, finds research from price comparison website moneysupermarket.com. More than 13 million Brits (28 per cent) have taken out a loan to consolidate all or some of their existing borrowing. Some 37 per cent of those aged 30 to 50 have consolidated their debt, compared with the national average of 28 per cent. However, many of those who took out a personal loan for debt consolidation purposes continued to build up even more debt.

The research shows that 8.5 million people (66 per cent of those who took out a debt consolidation loan) acquired additional debt by spending on their credit card (28 per cent), going overdrawn (12 per cent), by taking out another loan (5 per cent) or by doing a mixture of the three (21 per cent). Nearly one third (30 per cent) said they were about to consolidate again or were considering doing so. Consumers had mixed feelings about debt consolidation, with 31 per cent of existing debt consolidators feeling trapped by debt, while 13 per cent felt that debt consolidation was a positive step towards controlling their debt.

The moneysupermarket research shows that for many people consumer debt has become a necessary evil and about 26 per cent of people who have had debt consolidation loans fee that they will always be in the red, though they feel comfortable with managing their debt. A further 27 per cent are confident that they will eventually become debt free.

Tim Moss, head of loans and debt at moneysupermarket.com, said: ‘Debt has certainly become the common curse of modern times. Whereas 40 years ago being in the red was considered a last resort, it seems many of today’s Brits are much more accustomed to taking on debt – although actually being able to control it is another thing. People need to be careful that the ease of getting credit does not catch them out. ‘