Consolidation loans 'leading Brits further into debt'

A worrying number of people who take out debt consolidation loans go on to borrow more money, in what is becoming a vicious circle of debt for many Britons.

According to a survey by moneysupermarket.com, almost two out of three people who take out such a loan go on to borrow more money before they have finished repaying it.

Meanwhile, 44 per cent of people said they would consider consolidating their debt again despite this.

Many could be seeing such loans as a last-ditch measure to get out of debt, with ten per cent reporting that their borrowings have spiralled out of control.

Tim Moss, head of loans at moneysupermarket.com, said he was shocked by the fact that so many people are using consolidation more than once.

"Many people's finances are being stretched to breaking point by the spiralling cost of living and the credit crunch. But don't bury your head in the quick sand of debt. No matter how much providers lend you, you can't borrow your way out of it," he warned.

Mr Moss added that while debt consolodation does have its place, it should only be used by those who are extremely disciplined and will not borrow anything further.

Figures released last month by Fairinvestment.co.uk showed that the amount of money owed through credit cards and unsecured loans in Britain has soared as people try to keep up with their everyday expenses.

Average consumer borrowing now stands at £5,886 per person, whereas figures from Credit Action showed it was only £4,524 at the end of August last year.