Debt consolidation can save consumers 1,200, finds Alliance & Leicester

Consolidating existing debts to a single low-rate loan could save the average consumer 1,200.

16:10 14 December 2004

Consolidating existing debts to a single low-rate loan could save the average consumer 1,200, Alliance & Leicester has found.

But despite the considerable savings on offer, only one person in 12 (eight per cent) is considering this option.

Research out today by Alliance & Leicester Personal Loans found that by switching 5,000 of debt to a personal loan of 5.9 per cent could save the average consumer 1,213.56 in interest payments over three years.

However, when questioned on why they had no plans to consolidate their debts, two out of every five consumers (40 per cent) felt that debt consolidation was a "bad deal".

"It is worrying that so many people with expensive debts are ignoring their financial situation and not thinking about ways to reduce them and save money," said Andy Bayes, head of personal loans at Alliance & Leicester.

"Consolidating all debts onto one personal loan will not only save money, but offer a repayment discipline and offer reassurance by clearly setting out an 'end date' for their debt.

"Debt consolidation to a low-rate loan is a sensible and viable option for many of today's borrowers who yearn to be free of their debts. Looking to review finances in the new year is one resolution that shouldn't be broken."

Of the eight per cent of people who are thinking about debt consolidation, or the one in three who have already done so (32 per cent), most said a single personal loan could save them money through paying less interest.

Moreover, one in five said they were fed up with having debts that they are not paying off and 19 per cent said having many different debts was hard to manage.

Twenty-one per cent felt that that consolidation would give them the discipline to pay off their debts more quickly.