An increased number of Brits are now turning to Consolidation as a means of Debt Relief

As a nation struggling to manage our finances, it is estimated that approximately 6.5million of us here in the UK are turning to the idea of consolidating our debts.

Figures from MoneyExpert.com show that over the last 3 years some 14% of Brits have taken the opportunity to consolidate their debts as a way to bring their borrowing and spending habits under some kind of control. Their research also shows that 1.29million people have consolidates debts of as much as £20,000 or more. This figure is the result of an accumulation of overdrafts, credit/store cards and loans.

The trend is that it is the younger age group who are taking the decision to transfer their debts to the one lender, with 23% of all 25-34 year olds taking part in the study having already taken steps to consolidate their debts.

Furthermore, figures show a sharp increase over the last 6months in the demand for secured loans. Those among us choosing this option more often than not secure the loan against our own homes. Since October 2007, applications for homeowner loans has increased by 85%.

Chief Executive of MoneyExpert.com, Sean Gardner is encouraged by so many people being proactive in trying to manage their finances. He hopes these people can see for themselves that, in many cases, there can be significant savings to be made by moving all your debts to the one place. He says,“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.”

Mr.Gardner does add one word of warning though, and that is to view consolidation as a means to tackle debt problems and an attempt to get them under control. He strongly advises against repeating consolidation on any regular basis.

As with all financial advice/matters, one must always read the fine print and be aware, as Head of Personal Finance at Fool.co.uk tells us, that around half of all consolidation loans carry a penalty for early settlement.

Brits juggling many credit cards

According to a recent report many Brits are juggling multiple credit cards and continuing to get themselves into debt despite the credit crunch and despite the financial woes that many households are facing due to higher energy, food, petrol, and mortgage costs.

Figures show that over three million Brits have five or more credit cards that they are spending on, and this could simply add to the already massive personal debt problem in the UK.

Although financial markets are in turmoil and credit conditions are tight due to the global credit crunch many Brits are continuing to spend way above their means.

A third of Brits are said to have applied for another credit card over the past year, and those that have been turned down due to difficult credit conditions will also have adversely affected their credit profiles.

There are already concerns over the amount of personal debt in the UK, with industry officials expecting an increase in the number of people that will become insolvent over the course of the year.

One industry official said that getting another credit card is fine if it is to reduce debt – for example getting a 0% balance transfer card to save money on interest on existing credit card balances – but he said that consumers that are simply accruing credit card debt could hit problems in the future.

He said: ‘It is entirely healthy if people are swapping debts from one card to another, taking advantage of 0% deals to ensure that they pay as little interest as possible. But anyone who is trying to juggle five or more credit cards and owes money on all of them is in real trouble.’

Death and debt are often coupled together to emphasize the dangers of running up debts. Yet in today’s world it is unavoidable to take a single step without having to borrow. Modern lifestyle has been thus programmed into a debt culture. One debt leads to another until one finds that the borrowing road has come to an end with baying hounds of creditors nipping from all sides. It seems to be an impossible situation – a point of no return. But with debt consolidation hope is there.

Debt consolidation primarily has three distinct advantages. By putting all the debts in its one basket the borrower is spared the harassment and indignity of tackling many creditors. It brings peace of mind and one can go about work schedule with energy and hope. Secondly, debt consolidation manages all the debts in such a way that the overall amount spent towards repayment is reduced. This in turn leads to money being saved that can be fruitfully used. Thirdly it allows the borrower an opportunity to recover his or her bad credit ratings by paying back this one debt consolidation loan timely and regularly.

There are two types of debt consolidation loans – secured and unsecured. For secured loans a security or collateral has to be pledged. Since the lender does not have to bear any risk the rate of interest are low and terms of payment flexible and long. But many borrowers either cannot or do not wish to pledge any asset like property, valuables or documents as security. In this case the rate of interest is high and the period of lending short but the borrower does not have the fear of losing his goods and valuables.

Debt consolidation loans are available online. There are many lenders in the field and consequently competition is stiff. Borrowers are being wooed. Browsing online one can find out the various offers, free quotes, flexible terms, fees and the like before taking a decision. Online operation is very quick and simple – especially with secured loans. One can get a loan approved in principle (anything from 3,000 pounds to 50,000 pounds for 5 to 25 years) within an hour of submitting application. The money will come in after 14 days subsequent to checking details provided by borrower.

The payments can be insured to cover unforeseen circumstances like loss of work and ill health. Loan can be repaid anytime.