Britons 'are borrowing to pay off loans'

An alarming number of Britons are opting to plug financial deficits by borrowing rather than saving, it has been revealed.

A survey conducted by Fool found that almost four in ten people (39 per cent) take out loans to consolidate existing debt - while three in seven borrowers admit they would consider taking out another loan on top of the one they already have in the future.

According to David Kuo, head of personal finance at Fool, this practice often just papers over cracks rather than actually solving the root of consumers’ financial problems.

"It is always a good idea to consider alternatives before taking out a loan," he said.

"If you have some savings, then dipping into your nest egg is likely to cost less than borrowing money, even if it is a low-cost loan.

"Additionally, delaying your purchase and putting away some spare cash is bound to work out cheaper in the long-run.

"Borrowing money may seem like a convenient way to plug a hole in your spending plans, but a hole in your budget may be a sign of deeper problems that can often be solved, not by increasing net borrowing but by cutting gross spending."

The study also discovered the average loan to be in the region of £7,000, with vehicle purchase the most likely reason for a loan after debt consolidation.