Debt consolidation loans for homeowners
If you want to reduce your monthly outgoings and/or simplify your finances, a debt consolidation loan might be right for you.
How does debt consolidation work?
A debt consolidation loan is a new loan big enough to repay your existing debts. This effectively combines several debts into one, and means you`ll only have one debt repayment to make each month, instead of many.
A lot of people consolidate their debts in order to reduce their monthly outgoings, bringing them down to a level they know they can comfortably afford. You can do this by arranging to repay your debt consolidation loan over a longer period of time than your original debts - although this may mean you pay more overall, as you will pay more interest than if you had chosen a shorter repayment period.
However, you may still be able to reduce the overall interest you`re paying if the interest rate on your debt consolidation loan is lower than the interest rates of the debts you are consolidating. Just remember: the longer your repayment period, the more your interest payments will add up.
I`m a homeowner - can I get a debt consolidation remortgage?
If you own your home and you are looking to consolidate your debts, you may be able to find a debt consolidation remortgage, which has a few advantages over a debt consolidation loan.
A debt consolidation remortgage works in much the same way as a regular remortgage. You`ll borrow the money you need to pay off your old mortgage - but while you`re doing this, you`ll also borrow enough to pay off your unsecured debts.
A debt consolidation remortgage is, by definition, secured against your home, like any other mortgage, while debt consolidation loans can be secured or unsecured.
Secured against property, mortgages tend to come with significantly lower interest rates than unsecured loans. You should also have access to a longer repayment term (as with any mortgage) than you`d be offered if you took out a loan, although this will also mean you`re paying interest for longer. Depending on the value of your property and of your existing mortgage, you may also be able to borrow more money, although you`ll still need to show you can afford the repayments.
However, securing a debt against your property does come with risks - it`s important to think very carefully about your ability to repay the loan, as your home may be repossessed if you don`t keep up repayments on your mortgage or any other debt secured against it.
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Tags: debt, loans, debt consolidation, debt consolidation loans