Six million Brits consolidate loans

More than six million UK residents have taken out debt consolidation loans in the last three years, new figures reveal.

Data from MoneyExpert.com shows one adult Briton in seven has decided to bring their debts together in an effort to lower their monthly payments with the average debt consolidation loan standing at £13,000.

At the best interest rate available on a personal loan someone borrowing £13,000 over three years would repay £393.99 a month, MoneyExpert points out.

By contrast, adding £13,000 to a mortgage at five per cent would only increase payments by £86.92 a month - but over 20 years would repay £20,860 in total.

However, six per cent of people take out a debt consolidation loan for far more - with 360,000 borrowing over £50,000 - and loans over £50,000 generally have to be added to mortgages as they exceed the maximum loan amount on many personal loans.

"The UK's debt crisis is a serious concern and borrowers are starting to feel the strain," said MoneyExpert chief executive Sean Gardner.

"Debt consolidation is entirely sensible and a good way to get your finances under control if you owe money to different lenders at varying rates of interest.

"Theoretically you can reduce your monthly repayments and make your debts manageable."

But borrowers should not think their money troubles end once their loan comes in.

"It only works if you accept consolidation is a wake-up call to get your borrowing under control and then work to become debt-free. There has to be some concern that many people simply see consolidation as a way of keeping on borrowing," Mr Gardner added.

Britons in Yorkshire took out the most in personal loans at £16,065, followed by residents of East Anglia (£15,642) and Scotland (£14,439).