It is time for some statistics, and those still struggling with New Year hangovers will find them very sobering indeed. Thankfully there is some advice that comes with them.

UK consumers are paying £93 billion n a year in interest on personal loans, credit cards and mortgages. Personal debt in the UK totals £1.39 trillion, and nearly a quarter of borrowers are finding their debts unmanageable.

Nearly 10 million people have maxed out on one form of credit in the last six months and 38% have had a credit card application rejected. Three million people have taken out debt consolidation loans, but 65% of these did not close down existing forms of credit and racked up a further £2,300 on average in debt.

This information has been compiled by uswitch.com, and with the more worrying stats come some reassuring ones. They estimate that consumers could collectively save £15 billion in interest by consolidating all their unsecured debts and are urging borrowers to do this before their debt situation spirals out of control.

Of course there is an element of self-interest here, uswitch.com hopes that as soon as people decide to consolidate their loans they will be rushing over to their site to see which loan options they have. That does not necessarily, however, mean the advice is worthless.

Mike Naylor, personal finance expert at uSwitch.com, says ‘with banks tightening their lending belts more every day people need to keep a close eye on borrowing costs and monthly interest payments because every penny counts. An unsecured loan with a fixed monthly payment and a fixed interest rate may be a safer bet in this climate, but consolidation must be done properly.’ He adds ‘consumers must make sure they close down other existing forms of credit to avoid the temptation to rack up these debts again, otherwise any saving will be wiped out.’

Sage advice from Mr Naylor, I will reiterate his point that ‘consolidation must be done properly.’ As I have stated before on this blog that usually means avoiding the consolidation companies that advertise so prolifically on the television and using high street lenders that may mean monthly repayments are slightly higher but that will not keep you locked into a loan until your qualify for your pension.

This entry was posted on Wednesday, January 2nd, 2008 at 11:55 am and is filed under Personal Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.