Research from Sainsbury’s Bank Loans suggests that up to 212,000 people could take out personal loans worth up to £2.2 billion in the first three months of the year for debt consolidation.
The bank estimates that this figure could be equal to 33% of all personal loans taken out during January, February and March. The average loan size taken out to consolidate debts is estimated to be around £10,300.
To those looking to consolidate debts, Sainsbury’s Bank is encouraging them to ensure the monthly repayments will be lower under the terms of the new loan and that they can afford to cover any fees from their old lenders, before going ahead.
“Using a personal loan to consolidate debts can be a good way to bring monthly repayments down and simplify them under one provider,” said Simon Ranson, head of banking at Sainsbury’s Bank.
“However, it’s crucial you make sure you’re going to see a real advantage to moving, so work out if the total interest paid on the balance at the end of the repayment term will be lower, or at least comparable.”