Debt Consolidation Statistics
For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.
For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.
Debt consolidation is the process of paying off two or more loans with a new single loan. The latest debt consolidation statistics show that this can be an effective solution under the right circumstances.
The biggest benefit of debt consolidation is that the debtor will have just one monthly payment to make. This can be more manageable than making multiple payments.
The average interest rate on a debt consolidation loan is 22.59%.
Debt consolidation loans can be used to pay off various types of debt, such as:
- Personal loans
- Payday loans
- Credit cards
- Overdrafts
- Store cards
- Utility debts
- Car finance
Debt consolidation statistics
This type of loan can be an effective way to begin alleviating debt. But it pays to be aware of the following debt consolidation facts and figures!
- The average interest rate on a debt consolidation loan is 22.59%.
- To get the best rates on a consolidation loan, it’s helpful to have a credit score of between 720 and 850.
- Unsecured debt consolidation loans are usually only offered for debts lower than £25,000. For loans of a higher value, you’ll likely need to use a valuable asset as collateral.
Who qualifies for debt consolidation?
Debt consolidation is intended for someone who wants to restructure current loans into one. This will generally be because they are finding it hard to keep up with existing multiple payments.
If you want to do this, but you don’t have good credit, you can still be eligible for debt consolidation. However, without a favourable credit score, you’ll be seen as a risky lender, which means you’ll be subject to higher interest rates. If you get a high-interest rate loan, then you may not be saving much money, or any money at all, by taking this route.
It can be helpful if you improve your credit score before applying for a debt consolidation loan. Anything below a score of 629 will generally be considered low by lenders.
In 2019, 33% of people affected by debt were single adults with no children. This figure increased to 45% in 2020.
How a debt solution could help
Get StartedSome debt solutions can:
- Stop nasty calls from creditors
- Freeze interest and charges
- Reduce your monthly payments
A few debt solutions can even result in writing off some of your debt.
Here’s an example:
Situation
Monthly income £2,504 Monthly expenses £2,345 Total debt £32,049 Monthly debt repayments
Before £587 After £158 £429 reduction in monthly payments
If you want to learn what debt solutions are available to you, click the button below to get started.
Top reasons for debt
In 2020, the top reasons for debt were:
- Unemployment or redundancy
- A reduction in income
- A lack of control over finances
- An injury or health condition
- Covid-19
- Separation or divorce
One in six people in the UK is over-indebted.
Thousands have already tackled their debt
Every day our partners, The Debt Advice Service, help people find out whether they can lower their repayments and finally tackle or write off some of their debt.
Natasha
I’d recommend this firm to anyone struggling with debt – my mind has been put to rest, all is getting sorted.
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Debt Consolidation Debt Statistics FAQs
For example, if you take out a loan but fail to use it to repay your existing debts then this will increase your credit utilisation ratio. Also, taking out multiple debt consolidation loans is a red flag to future lenders and can impact your access to credit.
Additionally, not keeping up with the payments on your new loan will cause harm to your credit score. So, it’s worth considering if the new loan will be manageable before you go ahead.
Additionally, if your existing debt is high, it might be difficult to qualify for a personal loan. Or, if you are eligible for a personal loan but the interest rate is high, then there might not be a financial benefit to going ahead.
References
