For most of us, taking out a large personal loan with which to consolidate all our existing debt is a bad idea since most of us will typically end up owing more than we did in the first place according to recent research.
As there are now more and more people defaulting on their loans banks are increasingly feeling the pressure so don’t be surprised to see banks tightening up one their lending criteria as well as pushing rates on personal loan rates higher and higher. For instance the lowest personal loan today is close to 6.9% while just one year ago it was more like 5.9%.
More and more people believe they will never be debt free and over 8 million people who take out loans to consolidate debt will find that they actually owe more after 5 years than they did, according to research from moneysupermarket.com.
The study showed that 12.7 million Britons had taken out loans to consolidate some or all of their existing debt. However 8.4 million of those people continue to build up more and more debt.
A third of people who have taken out debt consolidation loans now feel that they are trapped by debt and that their debt is actually spiralling out of control. Only 13% of people who have to loans feel that it was a positive decision.
If you are thinking of taking out a personal loan make sure you shop around to find the right deal for you.