File this under “Weird, but True”. According to an article on the UK Personal Loan Store, more than 50% of the people who use a debt consolidation loan actually end up with more debt than they started with. Not that I am thinking of getting a debt consolidation loan – but the recent trends in borrowing in the UK show an alarming rise, and things are about even with the USA, for long the consumer debt champion of the world.
…a number of people use consolidation loans to pay off credit cards, but once the balance on the credit card is cleared it is all too tempting to rack up debt on it again, which is what many people tend to do. The average consolidation loan in the UK is for Â£16,459 but the survey revealed that even when given the opportunity to do so most people will not pay off the loan early.
The article on loan consolidation quotes a survey by fool.co.uk as the source for the data. If you are in the market for a debt consolidation loan, make sure you read the best practices for debt consolidation, which basically says it would be wise to use a lending broker in your search for a consolidation loan since they would have access to the widest range of loan providers. Also remember that the poorer your credit is, the more likely you might end up with a secured loan, as opposed to an unsecured loan. Defaulting on your payments will then cause the property which was the collateral to be seized by the lender. As a final tip, read the responses to this ask.metafilter.com question – some very nice tips there – between the tips they have all aspects of debt management covered.