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The debtor's road to ruin; PERSONAL FINANCE.

One in four people who take out a debt consolidation loan go on to run up more debts, a survey claimed today.

Nearly a third of all personal loans taken out during the past year were for debt consolidation, according to comparison website uSwitch.com.

But they said 26 per cent of these people went on to build up additional debts averaging pounds 2,221.

It added that six per cent of all people who took out an unsecured loan had also had to borrow more money in order to keep up with their repayments.

The group said 85 per cent of people who took out a debt consolidation loan were not asked by their lender about using it to pay off their existing debts and it called on banks to at least warn people about the dangers of not doing this.

USwitch claimed banks were also failing to properly assess affordability before advancing money.

It said its survey found that 15 per cent of people earning between pounds 10,000 and pounds 14,999 a year who took out a loan were lent between pounds 10,000 and pounds 12,499.

Mean while, research from MoneyExpert.com found that average personal loan rates have increased from 10.62 per cent at the beginning of the year to 11.4 per cent now, despite interest rates being cut by 0.25 per cent during the period.
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Title Annotation:Business
Publication:The Birmingham Post (England)
Date:Apr 4, 2008
Words:236
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