Consolidation Loans & Remortgage

Consolidation loans are loans which are taken out to clear all or most of your existing debts into one manageable monthly repayment. This allows you to pay what you owe, over a longer term, and thus reducing the monthly payment. Please note unlike a Debt Management Plan you are taking on more credit.

Consolidating means borrowing more money and is normally done by the following:

• Remortgage
• Secured Loan / Further Advance
• Unsecured Loan

A remortgage is when you change your existing mortgage to a different lender, generally for the benefit of a lower interest rate and therefore lower mortgage payments. In certain circumstances you may be able to increase the amount that you originally borrowed. However, this is only available when you have equity in your home (i.e. the value of your property is higher than the mortgage secured against it).

A remortgage can provide homeowners with additional funds which they can then use to pay off their personal debts. In order to consider a remortgage you must be able to afford the higher monthly mortgage payments which you will face.

Your home is at risk if you do not keep up your mortgage repayments.

Advantages

1. Potentially you would be paying at a lower rate with a remortgage than you would be with more traditional borrowing such as credit cards or overdrafts.
2. A remortgage is more flexible than other borrowing – the loan is payable over a longer term, you may have the ability to make overpayments, underpayments, or take payment holidays etc.
3. There is the potential for increasing disposable income.

Disadvantages

1. You would be securing previously unsecured debts against your property.
2. You may be increasing the term over which the existing debts would be paid – which could result in paying back more in interest during the term.
3. Although a remortgage can reduce your monthly outgoings, there could be charges to change lenders. i.e. you may incur a redemption penalty for leaving your current provider, an arrangement fee for moving to a new lender and potentially face valuation and legal costs.
4. If you have or have had credit problems then securing a cost effective remortgage may be difficult.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured against it.

If you have any further questions please do not hesitate to get contact us on freephone 0800 019 5696.