DEBT CONSOLIDATION:

Debt consolidation is a strategy sometimes used by consumers to better manage their debt problems. Rather than paying off several separate bills each month, a consumer consolidates his or her debts with a financial institution that will arrange for one lower monthly payment extending over a period of time. Short term debts usually come from credit cards, store cards and bank overdrafts. These are highly convenient and flexible forms of credit and are probably the fastest growing area of the market but they are very expensive and this is the main reason why debt consolidation has come about.

Debt Consolidation is usually appropriate when the client has trouble meeting their existing obligations and is able to lower their monthly payment with another more favourable loan. By extending the term over which the debt is repaid, the overall cost of the loan will be greater due to the addition of interest charges. The new loan, often secured on a property arranged through a re-mortgage, is typically taken out at a lower rate and over a longer term and is often used to repay existing short term borrowing.

Debt consolidation offers a chance to get this short term borrowing under control and offers a route to clearing the debt in a reasonable time frame. A consumer often borrows a fixed, usually secured, loan of enough money to pay back all your various short term credit balances.

You may have the beginnings of a debt problem if you find yourself doing any of the following:

  • You are using credit to pay credit bills.
  • You are paying no more than the minimum payments due on your credit cards.
  • You are using a credit card to take out cash advances.

Before taking on any new borrowing, think carefully about whether you will be able to afford the new repayments on top of your existing commitments and think about what would happen if your circumstances changed. To help you do this, draw up a budget taking into account how your income and spending are likely to change over the lifetime of the loan. Also look at how much you will pay back in total (multiply the monthly payment by the number of payments). You might be surprised!

Calculate the effect of a change in interest rates on your mortgage.

  • Always take into account the following when considering consolidating any debts within a re-mortgage:
  • Is the interest rate competitive?
  • Will the new loan really save you money?

The loan is secured against your home. You could risk losing your home if you fail to keep up the payments on the consolidation loan.Make sure the consolidated loan covers all your existing debts (except those which have a lower APR than the consolidation loan). Otherwise, you could find yourself having to pay back loans you had forgotten about at a time when you are already stretched paying back the consolidation loan. Once you've consolidated your short term loans don't build up new debts elsewhere. Cut up your credit cards so that you can't use them.

WHAT SHOULD YOU DO?

Give us a call or complete one of our simple contact forms & you can choose whether you would prefer a fully qualified advisor to contact you to assess your situation or whether you would prefer to submit more information through our website & have a recommendation supplied to you within 24 hours.

Whichever method you choose, you are under no obligation to proceed with any recommendation. We have industry specialist advisors ready to listen to your situation & our advice is totally impartial. We feel confident that our advice will have significant impact on your financial circumstances.

 

 

 

 

 

 

 

 

 

 

 

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