How to get value from debt consolidation loans
People should shop around when taking out a debt consolidation loan
Wednesday, 25, Jan 2006 09:57
More people apply for debt consolidation loans in January than in any other month, but thousands of these could end up wasting money.
As the Christmas credit and store card bills roll in, and overdrafts are stretched, UK residents look to consolidate their debts in a single personal loan - saving money and hassle.
But many people do not do enough to make sure they have the best-value deal on the market - seeing them spending more than they need on paying-off their debt.
"Sadly, many people don't shop around when taking out a personal loan, wrongly assuming they can only obtain a loan from the bank or building society they have their current account with," said Steven Baillie, Sainsbury's Bank loans manager.
"Consolidating your debts with a more competitive loan could save you hundreds or thousands of pounds in interest so it's important to shop around to find a competitive rate."
Sainsbury's Bank calculates more than 150,000 UK residents will take out debt consolidation loans between January and March this year.
And now is a good time to take out a loan, as a string of providers lower the cost of their loans.
"A price war for loans has suddenly broken out which is great news for consumers looking for a low personal loan rate," said Stuart Glendinning, director of personal loans at comparison site moneysupermarket.com
He added: "I have never seen such a frenzy of activity in such a short space of time. Providers are obviously aiming to get the year off to a good start - January is the biggest month of the year for loan applications as consumers look to consolidate debt and sort out their finances.
"The market is now awash with rates below six per cent APR. Speculation of a base rate reduction in the first quarter of this year may have spurred some of this competition."
But while cheap personal loans are good news for Britain's consumers, Mr Glendinning also issued a warning.
"Consumers need to be mindful that only those with an excellent credit profile will benefit from this competition which is the minority of adults in the UK," he said.
"Other customers with a poorer profile will find it more difficult to achieve the most competitive deals based on their circumstances."
To find a cheap personal loan, go to www.myfinances.co.uk/loans.htm