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Debt consolidation loans can be a very effective tool in reducing a persons overall debt, however they can also be detrimental to your finances if used irresponsibly.

The primary reason for using a loan to consolidate debts is to reduce the overall interest rate accumulated through other forms of credit. It makes perfect sense to consolidate your debts under the banner of a low cost loan if the APR payable is less than that on your other outstanding credit. It can also make your debts more manageable as rather than making numerous payments, to different creditors you can make just one payment each month and budget accordingly.

The biggest down fall for consumers with this kind of borrowing is the temptation to take more than you need. Recent studies have revealed than many consumers actually increase their overall debt using this method, by borrowing over the odds in order to have a “little to play with” after consolidating their debts.

It is important to understand that a debt consolidation loan is designed to make repaying debts more manageable, if you borrow more than the sum of your debts you are defeating the object and adding to your debt problem.

Unsecured debt in the UK is most prevalent in UK women new studies reveal.

The average debt for women in the UK equates to around £520, with the total debt being around £19 billion mark. Women tend to run up debt on personal shopping sprees with the bulk being spent through credit cards, overdrafts and of course unsecured loans.

The average woman has a total unsecured loan debt of around £8,000, which is up by almost £7,000 with 2 thirds being spent on fashion and personal grooming.

The major change in trend seems to be leaning away from previous female issues such as weight concerns and is becoming more focused on debt.

A new study conducted by sainsbury’s bank suggests that just shy of 8 million people intend on purchasing a new car this year, and the majority of which are opting for cheap car loans to fund the purchase.

This indicates a change in spending patterns and a more heightened consumer awareness of the increased competition in the finance market. Approximately 8 billion pounds will be borrowed over the next few months by consumers for the purchase of a new car. Fewer people are opting for direct car finance and are turning to lenders for competitively charged car loans as an alternative.

On the other hand, the number of actual new car purchases is down compared to last year. Their is no definitive reason to explain the dip in spending, although environmental factors  and increased interest rates could be to blame.

The FSA has announced plans to ease rules on simple insurance products such as household cover but tighten regulations on more complex plans for such products as loan payment protection cover.

The move comes in light of recent research which suggests that few consumers rely on disclosure documents, when purchasing simple insurance plans for car cover or home insurance.

However their have been marked failures by companies selling more complex schemes such as loan protection insurance for failure to make payment due to illness or loss of work. The FSA may introduce tougher guidelines to improve sales quality for these products, ensuring the consumer receives concise and correct information before agreeing to a plan.

The financial watchdog is expected to release new guidelines on the change in legislation, before the change in regulation due in December of this year.

Debt is a burden many people have to live with. How, when and why people get into debt is not an easy question to answer as the reasons vary from individual to individual but usually its due to a sudden change in circumstance.

Their are a number of different ways to tackle personal debt but each solution is unique to the person and more specifically to the level of debt.

The average household debt is the UK is just over £7000 excluding mortgages, however a large percentage of people have debts which exceed the £20,000 pound mark. For people in a lower debt band their are usually quite practical ways of dealing with debt. The first and most obvious is to review your current situation, including spending habits ect and decide if your debt can be controlled with a little self adjustment.

The second and most common option to consider are debt consolidation loans. The reason many consumers choose this particular method of debt control is predominetly due to reduced interest on a debt loan. If you have different forms of credit such as store cards or other types of loans chances are the interest rates will vary. Debt consolidation loans allow you to effectively “pull” all of your outstanding debts together.

However, this is only worthwhile if the rate of interest and the monthly repayments are lower and more importantly are more affordable than your current commitments. It is also worth baring in mind, that a debt consolidation loan will probably be subject to a long repayment term.

If your debts are more serious other options include Debt Management and IVA’s. An IVA is quite a drastic step to take and you should think long and hard before comitting to such a plan as it will mean that any other forms of credit will not be available to you.

If you need any advice or information regarding debt help, you should contact your local Citizens Advice Bureau.