Control debt with debt consolidation loans
If you have various debts, possibly spread over a variety of smaller loans, credit cards, and store cards, consolidating debt can save time, effort and most importantly money, as well as giving you greater control over your debt repayment strategy.
In addition to consolidating debt repayments into one single loan, it may be possible to arrange the loan with an extended repayment period, thus reducing your monthly outgoings at the same time.
Unsecured debt consolidation loans
When consolidating debt consisting of a number of small to medium sized amounts, debt consolidation loans of up to £15,000 may be available on an unsecured basis. This means that the debt consolidation loan is not linked to your home or other assets. Unsecured debt consolidation loans are given based on trust, on the quality of your prior credit record, or by your own bank or building society on the basis of your good relationship in the past.
Do you need debt consolidation advice? Make a financial advice enquiry online or contact us on freephone 0800 678 5929
Secured debt consolidation loans
Secured debt consolidation loans are loans for consolidating debt which are linked to an asset or security, usually your home. For homeowners, one of the most common strategies for consolidating debt is to use the equity value which may have built up in their home, by taking out a remortgage. Remortgages can effectively function as a debt consolidation loan, because you can fold the value of your existing debts into the remortgage, using the proceeds of the remortgage to pay them off.
When dealing with high-interest debts such as credit cards, a remortgage will usually result in a considerably lower rate of interest on your debt. With a debt consolidation loan managed as all or part of a remortgage, you may also extend the term for repayment. Both these steps reduce your outgoings on a month by month basis.
For those with a good credit rating and a good history of repaying both their mortgage and their other debts, using a remortgage to raise additional capital for debt consolidation will be easier than for those who have missed repayments in the past.
Unfortunately, for those with an imperfect credit record, obtaining a remortgage for debt consolidation from a mainstream lender can be difficult. The first step is to speak to your current mortgage lender, and explain that the purpose of the remortgage is debt consolidation, designed to reduce your existing outgoings.
If your existing mortgage provider does not agree to approve a remortgage, then you may need to consider approaching alternative lenders to seek a remortgage for consolidating debt.
Any lender considering a remortgage application for debt consolidation will assess the amount of equity built up in your property, whether your current mortgage is up to date, whether you have a steady income, whether there are redemption penalties applying to your mortgage, and whether there are any other secured loans attached to your property.
Get advice on remortgaging as a debt consolidation loan – make a financial advice enquiry online or contact us on freephone 0800 678 5929
