With an increasing number of households finding themselves under financial strain as a result of high living costs, tight credit conditions, and rising bills, it is little wonder that so many have decided to turn to consolidation in order to try and reduce their outgoings, reduce the number of debts that they have to deal with, and ease the financial strain that is has left many teetering on the financial brink. However, it is important for anyone that is considering this step to determine whether consolidation is the right answer.

Consolidation is undoubtedly the right move for some consumers, as it means that they can reduce the number of debts and creditors that they have to deal with, reduce the amount that they pay out each month, and really streamline their finances, making financial management far easier and less stressful. However, there are also those that may not find consolidation very effective.

Those with little willpower when it comes to spending could find that consolidation actually lands them in a heap of trouble, as they may consolidate their debts, such as credit and store cards, and then quickly run up their original debts again. This will leave them with the consolidation loan to repay as well as the original debts, putting them in an even worse situation than before. Also, those with poor credit may find that they cannot get a low rate consolidation loan, and therefore may not gain any financial benefit from consolidating.

One the other hand there are plenty of people that can benefit from consolidation providing they exercise some willpower and determination, and do not run up debts again. In fact, research shows that over the past three years around 6.5 million borrowers have consolidated debts in order to reduce their outgoings. Out of these around 1.29 million have consolidated debts of £20,000 or more, including credit cards, store cards, loan, and other forms of finance.

One industry official recently stated: “Anyone who is juggling a range of debts with money owed on credit cards, store cards and loans should be acting to get their debts under control. It is encouraging that so many people have taken action as you can make significant savings by moving all your debts to one place.” He went on to state: “With average standard credit card rates at 17.01 per cent compared to average unsecured loan rates of 8.44 per cent it is clear that borrowers can cut their monthly interest bill by moving. However it is crucial that borrowers see consolidation as a wake-up call to get debts under control. It shouldn’t be something you keep on doing simply to tide you over from year to year.”

According to figures around 14% of borrowers have moved their various debts to one provider through consolidation in the past three years. It is thought that younger people aged between 25 and 34 are most likely to consolidate, with 23% of consolidators falling into this age group

Recent additions:

• CAB still dealing with many debt enquiries
•  Broker could be facing severe problems
• First annual fall since 90s for house prices
• Lord Hunt recommends changes to FOS

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