Debt Consolidation Getting More Expensive!

Monday 8th October, 2007 

If you are using debt consolidation as a means to make life easier for you should take note of the following interest rate rises.

The ever looming credit crunch and the uncertainty in the financial markets have forced a number of loan providers to increase their interest rates on unsecured and secured loans.

According to Moneyfacts.co.uk the biggest raise in the interest rates came from Bradford & Bingley which increased their rates by 4 percent to 17.9% for those wishing to borrow between £2k and £3k. For larger loans between £5k and £7.5k B&B's interest rate now stands at 9.9% an increase of 3.2%.

Many loan companies are following Bradford & Bingley's lead and are increasing their interest rates. Cheshire and Derbyshire are quoting an interest rate of 9.9% for loans between £5k and £7k, a rise of 3%. The troubled Northern Rock have also been forced to increase their interest rates too: raising their interest rates by half a percent for loans up to £25k.

For those continually delay paying off their debts by using debt consolidation loans this news is worrying. Many see debt consolidations loans as a means of treading water, paying off their original loan with another loan with no impact on their original debt. Used in the right way debt consolidation can be used to lower monthly payments whilst the core issue of overspending is addressed, resulting in the debt being reduced. However, for those who use debt consolidation as a means of treading water two things can happen; the water can get rougher ie interests rate rises, making it harder for them to keep their head above the water or the they'll get exhausted and just drown in a sea of debt.

Debtwatchdog's view is that due to the uncertainty in the financial market those who do not have a clear strategy on how to deal with their debt should start looking at their spending patterns and budget more effectively. For more information on how to balance your household finances complete our Statement of Affairs. This free tool will empower you onto the road to financial recovery.