THE majority of Wearsiders who take out a loan to consolidate debt go on to rack up even more credit card bills and overdraft charges, research today suggested.
New figures from StepChange Debt Charity show that most consumers in Sunderland who take out a consolidation loan continue to build up more debt while still paying off the original loan.
It found that the average unsecured debt level of people in the city contacting its helpline has risen in the past year.
For the first nine months of 2012, the average client in Sunderland owed £15,454, a jump from £14,859 in 2011.
The increase in the average debt levels in the city stands in contrast to the national trend of falling debt levels.
In the first three quarters of 2012, the charity advised 388 local people regarding their debt problems, compared with 501 the previous year.
Delroy Corinaldi, pictured, external affairs director of the charity, said: “The rise in average debt levels is concerning, especially when compared with the falling national average.
“Many families are struggling under a burden of debt as household budgets are squeezed by low wage growth and rising living costs.
“To anyone struggling financially, debt consolidation can seem to offer a quick fix, but borrowing more is rarely a good way to deal with a debt problem.”
Mr Corinaldi said many people will be struggling with their finances following Christmas and debt consolidation could seem a tempting move.
The theory behind it is that people borrow at as low a rate as possible to pay off all their debts from overdrafts, credit cards and other loans.
However, he warned that it can often compound rather than remedy the problem, with longer repayment terms and ultimately higher levels of debt.
Recent research showed that people who consolidate their debts often return to using other forms of credit and can end up with even higher levels of borrowing.
“We would urge anyone struggling with debt to seek help from the charity, which will draw up a detailed household budget and advise on the most appropriate debt management solution,” said Mr Corinaldi.
“We would encourage anyone who is struggling with problem debt to immediately seek free and impartial help from an organisation like StepChange Debt Charity, who can help by recommending a debt management solution that is tailored specifically to a person’s individual circumstances.”
For more information about the charity, visit www.stepchange.org or call 0800 138 1111.