Such is the claim of Moneyfacts, which states that the taking out of a personal loan for debt consolidation purposes can be an "ideal solution" for many consumers. It was suggested taking out a loan could assist many people in lowering the various demands on their spending and reducing the amount of interest paid each month. Additionally, the personal finance portal put forward that for those who are "less disciplined" when it comes to managing their money, a fixed monthly repayment could offer borrowers the structure needed "to commit to repay the debt within a given time".



Moneyfacts went on to state that people should always consider whether a

The finance publication states: "The credit crunch has caused the personal loan market to tighten, lenders have withdrawn from the market and rates have seen a continuous increase throughout 2007. Don't be fooled into thinking that your existing bank or building society will always give you the best deal, just because you have a relationship with them. With detailed computerised credit scoring systems used these days, loyalty makes little difference. The difference between the best and worst interest rates can be almost double, so choosing the wrong loan provider can be a costly mistake."

As a result, those looking to apply for a loan were urged to make sure they shop around for the most competitive deal possible, not just on the form of borrowing but also should they choose to take out payment protection insurance (PPI) to cover their repayments. It was suggested that the difference between the most competitive and cheapest PPI policy can add an extra 1,760 pounds 40p on to the cost of a 5,000 pounds loan taken out over three years, or 4,157 pounds 40p to a 25,000 pounds loan payable over a five-year period.

In addition, borrowers were reminded that many personal loans offer a typical rate, in which two-thirds of those accepted for a loan are offered the advertised rate of interest. The remaining 33 per cent, meanwhile, are offered a different rate, dependent on their credit rating. As a result, getting a copy of their financial file beforehand and thorough research could offer them a better chance of getting a cheap loan. "Getting the best deal will mean your monthly repayment will be cheaper and you can escape from your debt burden much earlier," Moneyfacts added.

For people concerned about their ability to manage their finances over the course of 2008, a cheap loan may be helpful. Helen Saxon, spokesperson for the Finance and Leasing Association, claimed that the series of interest rate rises by the Bank of England's monetary policy committee since August 2006, in addition to the recent credit crunch, have caused many Britons to "stop and take stock of their borrowing". However, she claimed that although a number of lenders have withdrawn some of their cheapest deals, everyone who is looking to access a loan should still be able to do so. Miss Saxon pointed out that last month's rate cut "will be welcome news" to those wanting to apply for a loan.