Personal loans 'can be used to consolidate other debt

Consumers thinking about consolidating their debt could consider using a loan, an industry expert has said.

Rachel Lacey, editor of Moneywise personal finance magazine, said that there were still some good deals on personal loans, but that it was becoming increasingly difficult to secure the best loan rates.

She added that personal loans had "to be used in the right way" for them to be most efficient.

"The thing is with a personal loan, they can be great for consolidating other debts, but you have to be really careful with the fact that you stop further borrowing," Ms Lacey said.

"It's no good consolidating all your credit cards and all your existing loans onto one personal loan just to carry on borrowing and using your overdraft and taking out another credit card."

Recent figures from uSwitch suggested that consumers could save £830 in interest by changing their loan deal halfway through a contract.
Mike Naylor, personal finance expert at the site, explained: "While they still can, consumers should give loan providers the wake-up call they need and move their business elsewhere if better deals become available.

"Whilst consumers continue to display this level of apathy, loan providers will rub their hands together with glee and continue to profit from the not so tarty loan customers."