Debt Consolidation is not the answer. Shame on you Alliance and Leicester

Debt Consolidation is not the answer. Shame on you Alliance and Leicester

Update Note:

A&L contacted me after it read this blog. Its PR consultancy incorrectly sent me an early draft of the release. A&L itself had rewritten it to delete the reference to consolidation and this is the one I should have got. It’s apologised I got the wrong one and I’m pleased to see it wasn’t pushing consolidation after all!

Original blog:

I received a press release from A&L today titled “INDEBTED CONSUMERS FAIL TO RECOGNISE FINANCIAL BENEFITS OF DEBT CONSOLIDATION”. Frankly I was spitting teeth afterwards and immediately filed back the following email to the press office: “I find this press release morally reprehensible. Consolidation is NOT a good thing for consumers. Cutting the cost of debt is. To get the two confused plays into the hands of the evil secured debt sellers. A&L should know better!”

It’s this imprecise use of language that lands people into severe debt and one of our biggest banks should know better.

Consolidation for consolidation’s sake is ridiculous. If I had debts at 4%, 2% and 1% what’s the point of consolidating them into a loan at 33%? That’s not the point. The two prime considerations for those in debt crisis (regarding the debts themselves this is) should be i. to reduce the cost of the debts ii. to ensure the monthly repayments are manageable.

The A&L press release is actually talking about moving to a cheaper one off personal loan. For some this isn’t a bad strategy. For many, moving to cheaper credit card balance transfers is an even better option and even those wanting to move to a loan can find cheaper than A&L (see Cheapest Personal Loan Article).

The problem is, like many, A&L has confused cost reduction and consolidation. The problem with this is it plays into the hand of the hideous debt consolidators advertising secured debts on the TV or in the red tops. This of course means many people risk their homes to consolidate and get debts, which aren’t necessarily cheaper. What gets me about all this, is A&L isn’t stupid, it knows what it’s doing. What saddens me is read the papers this Wed and Sunday and many of the money pages may well just pick up on this story – press releases often make fodder for some lazy journalists (I’m not castigating some of my colleagues, but there are many junior hacks out there who rely on releases like this for stories).

If you have severe debts please ignore A&L and read my ‘Problem Debts: Where To Start‘ Article

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