A debt consolidation loan may not be the answer when you find your collective borrowing has become too much, the Consumer Credit Counselling Service (CCCS) has warned.

The public information group has cautioned that while “one easy monthly payment to cover your debts” may look like the answer when advertised on the television, a consolidation loan can add to the risks.

Frances Walker, spokesperson for the CCCS, urged prudence and vigilance among consumers who were considering an all-encompassing loan, as they may be securing it against their home.

“There is a lot of advertising in the tabloids and on TV now that promote consolidation loans,” she said.

“When you are in debt, it is generally not a good idea to get a consolidation loan,” Ms Walker warned. “Nine times out of ten a loan of this type is secured against your property, [which] could prove quite risky.”

In using real estate to secure a loan, non-payment becomes a much more serious issue because there is always the possibility that a debtor’s house could be repossessed should they slip behind in repayments.

This should always be taken into account before agreeing to a debt consolidation solution, Ms Walker concluded.

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