Brits could shave £20billion off the interest they pay on their debts with a consolidation loan or credit card, research from uSwitch.com has revealed.
The study found that Brits are shelling out £98billion in interest each year on personal debt
, which totals £1.456trillion. Yet Brits could be saving a collective £20billion through a consolidation loan
or credit card
According to uSwitch.com, 1.3 million loans
were issued for debt consolidation last year, yet less than a quarter of those borrowers closed down existing forms of credit, when the purpose of the loan is to allow for this.
In fact, 26 per cent of those who did not close down existing debts went on to rack up a further £2,221 in addition to the new loan, which is why uSwitch.com is urging Brits to act responsibly or seek debt advice.
And, as loan interest rates
continue to rise, despite the Bank of England rate falling to 1.5 per cent, uSwitch.com is also urging Brits to act fast when it comes to consolidation loans.
Commenting, Louise Bond, personal finance manager at uSwitch.com said: "As we embark on what is expected to be one of the toughest years in the history of the UK, it is vital that borrowers give themselves the best possible chance of servicing their debt in the most economical and manageable way possible.
"If consumers are careful about managing their spending, a debt consolidation loan can help reduce monthly repayments, and it can also help to settle borrowings earlier as repayments are fixed and set for an agreed number of years."
Commenting on the failure of some borrowers to use a consolidation loan appropriately, she added: "The purpose of a consolidation loan is to reduce debts – consumers should not be tempted to fall into the trap of racking up these debts again as they could end up finding themselves in a vicious debt-cycle."
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