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Loans `often used to consolidate debts`

01/11/2007

Debt consolidation is the number one reason for consumers in the UK to take out a personal loan, a financial expert has claimed.

Using a personal loan as part of a debt management strategy is not necessarily a "bad thing" as it allows consumers time to get their finances in order, the head of loans at Sainsbury`s Bank stated.

Research from the bank found that after debt consolidation, loans are often used to help fund a new car or pay for home improvements. Stephen Baillie said that a person`s decision to start sorting out their finances is usually triggered by them borrowing more money.

Mr Baillie added: "What you`ll probably find is anybody that`s doing debt consolidation will probably be doing an element of a purchase at the same time.

"So there`s a trigger to sorting things out, whether they`re sorting out the house, or putting a new bathroom in or whether they`re getting a second car for the family et cetera."

According to Credit Action, total consumer credit lending to individuals in September 2007 was £217 billion.

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