The average amount of debt owed by each UK adult is now £30,120 according to recent research compiled by Credit Action. Debt consolidation is often a welcome way out for people who are struggling with too much debt. The last three years has seen more than six million people apply for a consolidation loan. It is estimated that seven out of every ten adults use this method.
Of the people who are struggling with their debt, about 28%, (which is equal to 12.7 million people), try to lump all their payments into one more manageable loan. However, the downside to this is that about two-thirds of these people continue to build on their personal debt.
These types of loans are some of the most popular consolidation options. The average consolidation loan is about £13,000 and if a consumer were to repay such a loan at a 5.9 per cent rate over three years, the average monthly repayment sum would be about £300-£400. There is a smaller group who take on loans of over £20,000 to service their existing debt.
Consumers do have the option to consolidate their debt using a credit card with a 0% interest rate, but these offers are normally only valid for a specified period.
High street store cards are easy to fall prey to and 14 million of these have been issued in the UK. The average APR of these cards is about 30%, which is much more than what is charged on conventional credit cards. The UK Competition Commission had research done in 2005 that shows many shoppers pay inflated interest rates on their store charge cards and are being overcharged by £100 million each year.
There are a number of different debt consolidation options: multiple unsecured loans get converted into a new loan; debts get consolidated into a secured loan against an asset. Harrington Brooks would be able to review your options and advise you on which consolidation method is best for you. Some consumers, however, may not benefit from this method, as their credit profiles are too damaged, or because their debt commitments are already very high.
Should you decide that debt consolidation is an option for you, Harrington Brooks can help. Depending on your financial status, you might qualify to have one single loan instead of many loans from various lenders.