Many people will be enjoying the first payday of the year this week, yet with credit card bills also arriving on doormats up and down the country, it may be a short-lived celebration. After all, many will find they still need to pay for their Christmas frivolity, and as a result, the number of personal loan applications is likely to ramp up in the weeks ahead.
Indeed, new research from Sainsbury's Bank Loans estimates that as many as 180,000 people could take out personal loans for debt consolidation in the first three months of 2017, worth more than £2bn in total. This equates to 31% of all loans taken out during that period, highlighting how many people could be feeling the squeeze.
Not only that, but the estimated average loan size is projected to be around £11,400, 18% more than the average value of loans not intended for consolidating debts (£9,600), which means that the total value of loans taken out between January and March for debt consolidation will account for 35% of all loans during this period.
However, for many borrowers, this could prove to be a wise move. After all, consolidating debts can be a great way to secure a lower interest rate than on a typical credit card – unless you've got a 0% interest deal, of course – and will also mean you've only got one monthly repayment to worry about, helping you budget better and pay off your debts within a fixed timeframe.
Just make sure you go about it the right way. You want to make sure that consolidating will result in lower monthly repayments – otherwise you'll only be worsening the issue – and that there aren't any fees or costs you need to worry about when moving from your old lender. Make sure to compare quotes, too, so you can be sure you're getting the best deal possible.
"Personal loans can be a fantastic debt consolidation tool, enabling borrowers to lower their monthly repayments and unify their debts and payments under one provider," said Simon Ranson, head of Banking at Sainsbury's Bank. "However, in order to justify the new loan you'll need to work out if the interest paid on the consolidated balances by the end of the repayment term will be lower than the interest you would have paid under your existing arrangements."
But, if you do your sums and are confident you're making the right choice, a personal loan can be a great way to go. Start the process by heading to our loan calculator and see if you can consolidate to clear your Christmas debt with ease.
Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.