Could debt consolidation help you to budget?

As many households up and down the UK continue to keep a tight rein on their monthly budgets, new research has suggested that many people are looking to take control of their regular outgoings - in the form of debt consolidation.

Sainsbury's Loans has predicted that around 157,000 personal loans, worth a total of £1.5 billion, will be taken out to consolidate debts by the end of March this year.

The supermarket bank estimates that almost one in three (30%) personal loans taken out in the first three months of 2011 will be used at least partly to consolidate existing debts - which could help to take some pressure off many people's budgets.

Furthermore, the findings indicate that the average size of a loan taken out to consolidate debts is around £9,800.

A spokesperson for debt management company Gregory Pennington commented: "For some people looking to reduce their monthly outgoings, and give their budgets a bit more leeway, consolidating their existing debts with a loan can be ideal.

"Since consolidating your debts with a loan means you'll only have one monthly payment to make (and to just one lender), it could make a big difference when it comes to budgeting for all your regular monthly expenses.

"However, this is only suitable for people who are already quite financially comfortable, as it can't really help with serious financial problems."

Daniel Culpan