David Kuo, head of personal finance at Fool.co.uk, maintains that while in many cases a consolidation loan can help an indebted person avoid bankruptcy, there are cases in which matters are in fact made worse through this sort of debt solution.
It is important for consumers not to borrow more money than they actually need and do not fall back into old and costly habits when credit options become available, warns Mr Kuo.
He went on to say: “It is also vital to use consolidation loans sensibly, given that those newly paid-off credit cards will be brought back to life with enticing and generous spending limits.
“It can be difficult to resist whipping them out to reward yourself, especially if you have been diligently paying off your consolidation loan month after month.”
Figures released earlier this year by Money Expert showed that more than six million people in the UK have opted to take out a debt consolidation loan over the course of the last three years.