Debt Consolodation Guide
What is it?
Debt consolidation is the process of taking out one loan to pay off one or more other debts, like expensive credit cards and personal loans. Consolidation is often done to secure a lower interest rate, which ultimately means lower total monthly repayments.
How does it work?
Debts can be consolidated from a number of unsecured loans (expensive debts) into another unsecured loan (less expensive), but more often it involves a secured loan against an asset that serves as collateral, like a house. In this case, a mortgage is secured against the house. The other outstanding debts are then rolled into the mortgage at a lower interest rate, subject to enough equity available in the property to do this. However this means you will effectively pay more back for the new loan, simply because your paying ther debt back over a longer period of time. Caution should be used when thinking about consolidating debt.
Debt consolodation companies.
On occasion debt consolidation companies can discount the amount of the loan. When the debtor is in danger of bankruptcy, the debt consolidator will buy the loan at a discount. A prudent debtor can shop around for consolidators who will pass along some of the savings. Consolidation can affect the ability of the debtor to discharge debts in bankruptcy, so the decision to consolidate must be weighed carefully.
Debt consolidation is often advisable in theory when someone is paying credit card debt. Credit cards can carry a much larger interest rate than even an unsecured loan from a bank. Debtors with property such as a home or car may get a lower rate through a secured loan using their property as collateral.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
At North Mortgages our Mortgage Experts will take care of everything on your behalf. Remember, we source mortgages from the whole of the market, so you know your getting the best deals available and all tailored to suit your personal circumstances.
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