Loans to clear up debt 'make sense'
07 November 2007
07 November 2007
Using a personal loan to better manage one's finances makes "a great deal of sense", but only if managed wisely, finance experts have warned.
Debt consolidation is now the primary reason that people take out a personal loan, Moneyextra.com explained.
However, a personal loan works best when consumers ensure they do not run up further debt on their credit cards and overdraft and stick to the limits imposed by their loan lender.
Robin Amlot, senior editor of Moneyextra.com, said: "Two key factors about taking out an unsecured personal loan as a way of consolidating your debts is that you are fixing your interest rate - so you know what you'll be paying each month - and you are fixing a date in the future at which you will have cleared the debt.
"Using a personal loan in this way as a financial management tool makes a great deal of sense but only if you are then disciplined enough not to run up further debt on your credit card/s and overdraft in addition to the loan you are now paying down!"
The comments come as latest quarterly research by Thomas Charles debt consultancy, conducted in conjunction with YouGov, revealed that one in four Britons will avoid credit card spending this Christmas and 42 per cent of 18-34 year olds plan to cut down on entertainment spending.
