Debt consolidation loans add more debt

Friday 4th April, 2008 

A recent survey has revealed that over a quarter of those who have taken out a debt consolidation loan go on to run up even more debts.

The survey, commissioned by uSwitch, also revealed that one in three loans taken out last year was for debt consolidation. Of those who took out debt consolidation loans, 26% went on to run up additional debts of approximately £2,221.

Worryingly, it was revealed that 85% of those who took out these loans were not asked by the lenders for evidence that their existing loans were being paid off. Added to this, 15% of those who borrowed between £10k and £12.5k were only earning between £10,000 and £15,0000 a year and it is clear that the banks were adopting an irresponsible attitude in their lending

Unfortunately, the only people who suffer as a result of this type of irresponsible lending are their customers, the debtors. However, this does not make the banks any more compassionate towards those who are struggling to make the repayments. Today, with the credit crunch biting into the banks profits they are less likely to show compassion as they are bending over backwards to get any form of cash. Even if this means taking out bankruptcy proceedings against people who should have never been given a loan in the first instance.

Debtwatchdog's prediction is that there will be an avalanche of mis-selling actions taken out against those who were mis-sold loans, both unsecured and secured.

If you are worried about your debts, you must take steps to address them. First step is to assess how much control you have over your spending. This can be done by using our Statement of Affairs and then examining the ways in which you can save money.