Personal Loans 'Great' For Consolidating Debts

Taking out a personal loan for the purposes of debt consolidation can play a major part in consumers looking to get their money management back on track.

So claims Rachel Lacey, editor of Moneywise, who observes that an personal loan can reduce the various constraints that borrowers have on their spending. However, she urged that they be sensible and that after getting a consolidation loan consumers make sure that they do not go on to borrow more money and get further into the red.

In taking out a cheap consolidation loan, borrowers may be able to merge numerous financial demands - for example credit and store cards and other loans they may have taken out in the past - into a single low-cost repayment. This may lead to them having more disposable income at the end of each month.

She said: "The thing is with a personal loan, they can be great for consolidating other debts, but you have to be really careful with the fact that you stop further borrowing. It's no good consolidating all your credit cards and all your existing loans on to one personal loan just to carry on borrowing and using your overdraft and taking out another credit card. You can lower your rates by consolidating other debts on to personal loans, but you just have to stop further borrowing and you have to respect that - stop borrowing [and] make sure you pay that off every month."

And despite a tightening of lending criteria, the editor of the personal finance magazine claimed that borrowers are able to access personal loans that have "reasonably good" rates of interest attached to them. She stated loans charging interest of less than seven per cent are still available, with rates between 6.5 and 6.8 per cent "entirely reasonable". However, Ms Lacey claimed that people looking to get a low cost personal loan should be conscious that the headline rates advertised are only typical figures - that those who have a strong financial status will be charged - and that in reality they may be on a different tariff.

She added that those looking to consolidate their debts should look to opt for a personal loan, for instance the types that are available from major banks and the likes of Tesco and Sainsbury's, ahead of a secured loan or homeowner loan. By opting for one of the latter kinds of borrowing products, the Moneywise editor stated that consumers could find that their property is at risk if they are unable to keep up with monthly demands for payment.

Meanwhile, a recent set of research by uSwitch reveals that Britons are paying a total of 93 billion pounds in interest on UK loans, overdrafts, credit cards and mortgages. It was also revealed that three million consumers have taken out a consolidation loan, however two-thirds of these have gone on to accumulate further debts.

Taking out a debt consolidation loan may be of particular assistance to those looking to reorganise their spending after the festive period. Iain Wrenshall, director of Debt Help UK, recently stated that a cheap UK consolidation loan could help people struggling with several expensive credit cards at once as the form of borrowing may allow them to make repayments at a more affordable rate of interest.

Abbi Rouse writes for All About Loans. Visist us today to apply for secured UK loans, low cost personal loans, and loans for tenants. Visit today http://www.allaboutloans.co.uk