Consumers stand by to consolidate £2.93bn in debt

by Gill Montia

Story link: Consumers stand by to consolidate £2.93bn in debt

Recent research from Sainsbury’s Finance indicates that in the first three months of 2009, UK consumers could be involved in taking out 250,000 personal loans with a combined value of £2.93 billion, to consolidate debt.

January marks the start of the busiest time of year for the take-up of personal loans for this purpose and Steven Baillie, head of loans at Sainsbury’s, is convinced that debt consolidation is a good idea for someone with multiple sources of debt.

According to Mr Baillie, if the debt include store cards, individual rates of interest could be as high as 30% and consolidating a batch of non-secured loans can save hundreds or even thousands of pounds in interest repayments.

Currently, around 25% of personal loans are taken out for debt consolidation purposes, with the average loan standing at just under £12,000.

During 2008, around 700,000 personal loans worth over £8 billion were taken out by debt consolidators.

However, in 2009 Sainsbury’s expects January to be a heavy month, with around 18% of the annual total of such loans taken out as consumers review their post-Christmas finances in the light of the credit crisis and economic downturn.

Debt charity, Credit Action, estimated personal debt in the UK at £1.45 trillion at the end of November 2008, with the average household paying almost £4,000 a year in interest.