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Consolidators ‘trapped in debt cycle’

September 12, 2007 by admin  
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New research released by price comparison website moneysupermarket.com has revealed that many people who use debt consolidation services immediately start accumulating new debt on top of their consolidated loan.

Already over a quarter of the population (28 per cent) has taken out a loan to amalgamate all of their existing borrowings into a single, more manageable, monthly repayment schedule.

But the worrying new survey shows that instead of borrowers using consolidation as an opportunity to lift themselves out of debt, a majority (66 per cent) are continuing to sink deeper into the red.

Among consolidators, at least five per cent have gone on to take out another loan while 12 per cent are making use of their high-interest-rate overdraft facility. Some 28 per cent use their credit card as an extra source of credit and 21 per cent admit to doing a mixture of all of the above.

Tim Moss, head of loans and debt at moneysupermarket.com, said: “Debt has become the common curse of modern times. People need to be careful that the ease of getting credit doesn’t catch them out – it can soon spiral into a debt sentence.”

Statistics compiled by show that total UK personal debt at the end of July 2007 stood at £1,355 billion. Every day more than 300 people in the UK are declared insolvent or bankrupt.

Tags: Website, monthly repayment schedule.But, spiral, single, common curse, July, curse, Credit Action

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