Thursday, December 27, 2007

A warning has gone out to people who are considering consolidating their debt in the new year in a bid to ease Christmas over-spending woes.

Credit information experts, Equifax, said many people relying on taking out a loan to pay off credit and store cards may find that come the new year they face difficulties getting this kind of credit.

The warning comes as uswitch.com, the independent price comparison site, revealed UK consumers could save £15 billion in interest by consolidating all their unsecured debts into a low cost personal loan.

It said this could mean the difference between getting by or, for those teetering on the edge, being pushed into insolvency.

However with total UK personal debt at the end of October 2007 at £1,391 billion and average household debt in the UK at £55,877, including mortgages, Equifax thinks people should exercise some caution when applying for more credit.

Neil Munroe, external affairs director for Equifax, said there was a trend for people to borrow short-term over Christmas and consolidate that in the new year so there was always a subsequent rise in loan and mortgage applications.

He added: "The issue is whether those people who relied on that capability will find it more difficult to get credit.

"At the moment the general view is that if they are in the marginal area, so if their credit score is only marginally acceptable for lenders, they may find it more difficult."

Equifax also believes the effects of the credit crunch will prompt lenders to tighten up and look more at minor misdemeanour data that might have been ignored in the past.

Mr Munroe also warned that by applying for too many loans after being rejected could further tarnish people's credit record.

Source: http://www.myfinances.co.uk/news/
loans/debt-consolidation-loan/debt-consolidation-warning-$483508.htm