Nationwide is expecting the number of debt enquiries to surge in the new year as consumers try to cope with the cost of Christmas, but suggests consolidation loans and balance transfer credit cards could help.
The credit crunch has already caused the number of debt enquiries to rise, figures from Citizens Advice suggest, increasing from 455,297 in the period of July to September in 2008 to 572,970 in the same period in 2009.
Consequently, Nationwide expects the number of people seeking debt consolidation loans to rise in the first few months of 2010; in January 2009, 60 per cent of all Nationwide loans issued were for debt consolidation.
But consumers should not let their debts get on top of them, says Richard Napier, head of Nationwide personal loans and credit cards, because there are various options available to make them more manageable.
For example, debt consolidation loans offer a way of reducing monthly outgoings and making debt easier to manage by putting them all in one place, while interest–free balance transfer credit cards can reduce the overall cost of the debt and prevent it from spiraling further.
Commenting, Mr Napier said: "With Christmas over, some people will be thinking about how they had spent too much money over the festive period. For some, this will simply mean tightening their belts for a while and cutting back on a few luxuries. But for those already in debt, the New Year can signal greater money worries.
"Money worries are made worse if the debt is spread across many sources such as credit and store cards, overdrafts and loans. So if you have several outstanding debts, what is the best way to reduce that debt to avoid a Christmas debt hangover?"
Mr Napier explains that debt consolidation loans, at a reasonable interest rate, "can help people manage their finances that much easier."
Balance transfer credit cards – where the balances from several credit cards are all moved onto a new one – could save hundreds of pounds a year in interest, he said.
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