According to a recent study, debt consolidation loans are the least effective way for a consumer to control their debt problem.

Approximately half of all people who enter into a debt consolidation agreement admit failure in just 1.5 years of commencement. Experts suggest that consolidation loans are just not practical for people who have become seriously indebted, simply due to the level of control which needs to be exercised, in order for the plan to work. Statistics suggest that 1/3 of people who commit to a consolidation loan actually increase their overall debt by around 60%.

The primary reasons for failure, for people using this method stems (as mentioned previously) from the level of discipline needed in order for the scheme to be effective. In almost all cases, the reasons for people arriving at a situation, which warranted the use of a consolidation loan, was due to a serious mismanagement of credit in the first place. To prescribe further credit as a cure to the problem is obviously a recipe for disaster.

Numerous consumer groups have urged individuals to stay well away from consolidation loans as a means to manage their debt. It has also been suggested that lending institutions need to deter or decline people who are identified as being seriously indebted, to both protect consumer interests and to demonstrate best practice.