Low rate loan could be debt solution

07/01/2010

A 7.6 per cent APR loan, the lowest rate in the UK, has been announced by Nationwide to help customers consolidate their debt. This follows Santander’s recent comment that nearly 4.5 million credit card balances will be moved to zero percent promotional offers on credit cards.

The Nationwide offer applies to larger loans of between £7,500 and £14,999 when taken out for up to five years.

January generally sees an increase in the number of loans and balance transfers taken out in order to consolidate debt acquired in the lead up to the Christmas period.

In January 2009 debt consolidation loans made up nearly 60 per cent of all loans issued, according to the bank which hopes that its low rate loan will appeal to those looking consolidate their debt this January.

Nationwide's head of credit cards and personal loans Richard Napier, said: "For those who may have spent too much over the Christmas period and have several outstanding debts, a personal loan with a highly competitive rate may be the best solution.

"A personal loan could help reduce monthly outgoings into one manageable debt with fixed monthly repayments, helping people make the most of their hard earned money."

Kevin Stills, director of EuroDebt, commented: "Unfortunately the evidence suggests that nearly two thirds of debt consolidation loans result in the borrower becoming more indebted.

"As with credit card balance transfers, the temptation is to use the money borrowed on something other than paying off the other unsecured debts with high interest rates.

"This results in a debt spiral and much higher debt balances.

"Debt consolidation is really only available to the creditworthy from mainstream lenders, which is why we have seen a rise in home credit and pay day loans.

"It is now very common for EuroDebt to see people starting Debt Management Plans and IVAs with over £50,000 of unsecured debt."

Tags; Debt Management and Banking,

• Share
• 
• 
• Store
• 
• Follow
•