Debt Consolidation
Options
A debt consolidation
loan is when a consumer takes out a loan or other credit agreement in
order to pay off two or more existing debts such hire purchase or credit
cards. There are a number of credit products which may be used for this
purpose such as:
- An unsecured
personal loan.
- An advance
from an existing mortgage provider secured against property but leaving
the original mortgage intact.
- A secured
personal loan (a second charge mortgage secured on property, from a
lender other than the existing mortgagor, that enables the first charge
mortgage to remain in place).
- A remortgage.
- The transfer
of balances to a credit card (including the use of credit card cheques
to pay off non-credit card debts).
Before taking
out a consolidation loan borrowers should consider not only what they
can afford but also the following:
- What
debt consolidation is and what other alternatives are available.
- What
the interest rate and APR (annual percentage rate) is and whether it
is fixed or variable.
- Over
what period is the loan to be repaid.
- What
the total cost of the loan is.
- What
the monthly repayments are.
- Whether
there are circumstances which will alter the rate at which the capital
sum is paid back.
- What
will happen if a payment is missed.
- What
happens if they want to repay or refinance early (are there penalties
for early settlement?)
- If the
loan is secured on their home, the consequences of not keeping up with
payments and what is the procedure if they want to move.
Types
of Consolidation Loans
If you are a homeowner you have the option of taking out a secured or
an unsecured loan. The advantages of a secured loan are as follows:
- Because
the loan is secured against a property the risk to the lender is reduced
and a more attractive rate of interest may be obtained.
- You can
often borrow more and repay back over a longer period. It is possible
to borrow in some circumstances up to 125% of the value of the property
as a secured loan and this may be repaid over a period of up to 25 years.
- The underwriting
criteria for a secured can be less stringent. A poor credit history
will invariably result in a rejection for an unsecured loan but often
this would not apply on a secured loan application.
The main
disadvantage of a secured loan is that a second charge will be applied
to an already mortgaged property, which means that, in the event of non
payment of the monthly instalments the lender would have the right to
take possession of your home. Other than this one aspect a secured loan
would be a much better choice than an unsecured loan.
Debt
consolidation loans
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Legal
Debt
Consolidation Loans UK is a trading style
of Noble Business Services, 411-413
St Leonards Road, Windsor, SL4 3DT. Licensed credit brokers, licence
number 323701. THINK
CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY
BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER
DEBT SECURED ON IT. 12.5% APR typical variable.
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