16 February 2007
Two thirds of people who turn to debt consolidation in hope of a solution to their money woes will end up taking on more debt, a new study from MoneySupermarket.com has revealed.
As many as 28 per cent of Britons – 13 million people – have taken on a loan to cope with some of their existing borrowing, but 8.5 million of those will fail to dispel debt with a consolidation arrangement.
Credit card spending is the most common lure away from good financial intentions, with 28 per cent of consolidators caving into the temptation to spend, while another five per cent take out another loan later.
“Taking a personal loan to consolidate debts can be a useful way for people to get their finances under control,” commented Tim Moss, head of loans and debt at Moneysupmerket.com.
“But a loan for these purposes should be … regarded as a measure for becoming debt-free – not as a licence to go spending again,” he stressed.
Optimism and pessimism are about equally matched among consolidators – while 27 per cent of consolidators were sure they would be free of debt one day, 26 per cent said they’d always be in the red.