Taking on a debt consolidation loan can make sense for people with credit deals in place with a number of different lenders, according to one expert.
David Kuo, head of personal finance at Fool.co.uk, cited his own company’s research to point out that debt consolidation is the most common reason for British consumers to take out a loan.
Around 40 per cent of all the personal loans handed out in the UK are used to clear debt, but Mr Kuo has aimed to stress that such a solution requires a good deal of discipline.
“Rolling up several expensive debts into one affordable monthly payment can make sense if you are faced with a myriad of claims on your money,” he said.
“Consolidation loans can be a welcome lifeline, you need great discipline to stop it from being a noose around your neck.”
According to figures from the Insolvency Service, there were more than 10,000 Individual Voluntary Arrangements (IVAs) entered into in the UK during the second quarter of last year alone.