DEBT CONSOLIDATION EXPLAINED
What are my debt consolidation options as a homeowner?
When looking to consolidate debt there are a few options available to you with the most popular being a debt consolidation mortgage or a debt consolidation secured loan; sometimes referred to as a homeowner loan or a second charge mortgage. At Tailored Money we can offer advice on both to find the best debt consolidation solution for you.
A debt consolidation mortgage is using the equity in your property to release yourself from debts that have built up. Typically, it means that a person will take out a remortgage that is large enough to pay off an existing mortgage as well as any outstanding debts.
One of the main benefits of a debt consolidation mortgage is that it can significantly decrease the interest rate you pay which in turn will lower your overall monthly payment amount. Not only could it help pay off your debts quicker it also simplifies the debt into one monthly commitment elevating the responsibility of trying to keep track of various payments coming out on different days of each month.
If you have a number of outstanding debts such as credit cards, store cards or personal loans, a debt consolidation mortgage could give you greater control over your finances and help straighten out your personal finances. Here at Tailored Money we understand that not everyone is lucky enough to have a squeaky clean credit history, our advisors are on hand to offer help and advice on your debt consolidation mortgage even if you have some form of adverse credit including CCJ’s, defaults and missed mortgage payments.
Advantages of a debt consolidation mortgage:
The interest rate is usually lower than that of a credit card or loan
Having all debts consolidated makes it easier to budget with only one repayment each month
Debt consolidation can also help you improve your credit score because one debt consolidation loan will replace numerous different loans
You can usually borrow a higher amount
Disadvantages of a debt consolidation mortgage:
If your current mortgage rate is good, you may not get the same good rate again.
The loan will attract interest for a longer period meaning you may end up paying more over the longer term.
Whilst a remortgage will almost always be the cheapest option available to you, it may not always be possible depending on your personal circumstances so another option to be considered could be a debt consolidation secured loan.
The rates on a secured loan do tend to be higher than on that of a mortgage and the rate is determined by your credit score however with that being said, one of the main benefits of a secured loan is that the loan can still be taken out over a longer term and in theory you could still borrow as much as you would on a remortgage.
Advantages of a debt consolidation secured loan:
A secured loan gives you the ability to borrow a larger amount than with that of a personal loan that is unsecured.
A secured loan can be taken out over a longer term which will reduce the monthly repayments.
Various unsecured loans on credit cards and store cards could be negatively affecting your credit rating so a secured loan will help you to begin repairing a poor credit score.
Disadvantages of a debt consolidation secured loan:
Whilst a secured loan does give you the ability to pay back the debt over a longer period, this means that you will pay more in total interest.
Secured loans do lack in flexibility as there is almost always a penalty to pay if you clear the debt early.
With a secured loan if default on your payments, the lender can repossess your home in order to clear the debt.
Before you take on the commitment a debt consolidation mortgage or loan always consider the potential risks. If your circumstances change and you can no longer keep up with your repayments, your home could be repossessed. During the application stage for your remortgage or loan, regardless of your credit history, you will need to prove that you earn enough to repay the loan and that you are in a secure enough position financially to meet the payments long term.
So what can Tailored Money do to help secure you the debt consolidation loan that you need? Our experts know the market inside out and we understand that not everybody has a perfect credit history so we take the time to understand your personal circumstances and work with you to find the best debt consolidation option to suit your financial situation.
For a quick answer on how Tailored Money can help you with your debt consolidation mortgage or secured loan, click the Quick Decision button below.
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