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Loan rate rises may see more debt consolidations

01/08/2008

It is feared more British consumers may have to consider debt solutions such as consolidation loans after a number of loan companies announced increased rates.

According to new findings from Moneyfacts, 14 major lenders have put rates up in the last month.

Tesco Finance and the AA hit borrowers with two increases and the highest rise was five per cent, by Abbey.

The finance information provider said: "Family finances continue to be stretched, causing many to consider consolidating existing debts into one loan as a means of reducing monthly outgoings."

"The reduction may not be as great as expected," it continued, however.

One lender – Moneyback Bank – reduced its rates, by 0.20 per cent. Moneyfacts has recommended borrowers research the best possible deal to avoid mounting debts.

It added that if consumers choose payment protection insurance they should be aware that the lowest rate does not always work out the cheapest.

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