6.5 Million people consolidate debts

As many as 6.5 million people have consolidated debts in the last 3 years in order to try and keep in control of their finances. Alarmingly 1.29 million of us have unsecured debts of more than £20,000 - So that's debts run up on personal loans, credit cards, store cards and overdrafts.

By 'consolidation' I mean people that have consolidated all their unsecured debts with 1 bank. This proves that demand for secured loans has increased significantly over the last 6 months. Worryingly, people who are struggling to keep up with their debts often turn to secured loans or homeowner loans in order to pay off unsecured debt with a loan secured on the equity in their home. The problem is something like 60 per cent of people who do this then continue to use credit cards and apply for personal loans, stretching their finances to breaking point.

If you are struggling to keep up with repayments on a number of different debts, perhaps money owed on store cards, credit cards or a loan you should really take action now to take control of your finances.

On one hand it is very good news that people are looking to consolidate their debts and take control of their finances, however on the other hand it is essential that these people do not fall into the false thinking that because they have consolidated their current debts they can suddenly afford to borrow even more. Moving your debts into one place can help you save money.

In the UK I think the average credit card interest rate is something like 16.9 per cent, Typical APR, Variable. unsecured loan interest rates are much lower at around 9 per cent; secured loans are also lower at around 14 to 15 per cent. This kind of difference in interest rates will make a difference in monthly payments.

I can’t stress enough that debt consolidation should be done as a way of getting your finances under control it should not be used year after year to fund additional spending on credit cards and loans.