More than 180,000 people across the UK could take out personal loans for debt consolidation in the first three months of 2017, worth more than £2 billion, according to new research from Sainsbury’s Bank Loans.
This figure equals an estimated 31% of all personal loans taken out in the first three months of the new year. The estimated average loan size is projected to be around £11,400 – 18% more than the average value of loans not intended for consolidating debts (£9,600).
This means that the total value of loans taken out between January and March 2017 for debt consolidation will account for 35% of all loans during this period.
Sainsbury’s Bank is encouraging those looking to consolidate debts to ensure their monthly repayments will be lower under the terms of the new loan and that they are able to cover any fees from their old lenders before borrowing.
Simon Ranson, head of banking at Sainsbury’s Bank said: “Personal loans can be a fantastic debt consolidation tool, enabling borrowers to lower their monthly repayments and unify their debts and payments under one provider.
“However, in order to justify the new loan you’ll need to work out if the interest paid on the consolidated balances by the end of the repayment term will be lower than the interest you would have paid under your existing arrangements.”