Debt Consolidation

What is debt consolidation?

Debt consolidation involves taking out a single loan or credit card to pay off multiple debts. Debt consolidation generally means clearing your unsecured debts using funds raised by secured or unsecured loans, remortgaging your property or perhaps using equity release. Debt consolidation is only recommended if the monies raised will clear your debts, the repayments are affordable and will leave you in a better position financially.

Is Debt Consolidation suitable for me?

Debt consolidation is appropriate in the right circumstances.  We offer advice on all available and appropriate solutions including consolidating your debts with new advances.

For example, it may be possible to raise a sum of money and offer this sum to creditors as a discounted settlement. Our team will provide debt advice and properly assess your circumstances and if consolidating your debts with a new loan is right for you. We work with specialist brokers who do offer a range of different lending solutions and who are regulated to offer debt advice on lending options.

Secured loans

A secured loan works like a second mortgage, and it is secured against your property. This is why it is sometimes called a ‘second charge mortgage’. If you are a homeowner, then a secured loan can be a viable solution especially to pay off unsecured debt. The amount you can borrow will depend on the amount of equity in your property and your affordability. Interest rates can be higher than remortgaging. Failure to maintain payments to a secured loan could put your property at risk you should always seek professional advice.

Remortgage

A remortgage is the process of replacing your current mortgage with a new one. Your current mortgage, however there are a range of lenders who offer remortgages for debt consolidation, so it is good to shop around and look at the interest rates available.

You need to carefully consider whether you can afford the new mortgage repayments before proceeding with this solution .as failure to maintain payments may put your home at risk. Your home may be repossessed if you are unable to keep up with your payments.

Equity Release/Lifetime Mortgage

Increasing numbers of mature people are finding themselves with unaffordable debt levels. If you have a property with a low level mortgage or perhaps no mortgage, it is possible to raise money on your property to help out with your finances. These are long term loans that are secured on your property and usually paid back when you eventually sell your property.

There are a range of equity release products some of which involve paying off the interest with others that do not involve any monthly payment but where the interest is rolled up and paid off when the property is sold.

We strongly advise you get full debt advice before agreeing to take out an equity release loan. These loans can sometimes carry expensive repayment penalties and generally, the loans (that do not require monthly payments) will lead to the amount you need to repay on your property increasing.

Unsecured Loans

The term unsecured means that the loan is not linked to your asset, such as your home. Some consolidation loans need you to secure the loan against your home. That means if you fall behind or cannot afford payments, your home could be repossessed.

Consolidating your debt through an unsecured loan may be preferable to a loan that is secured on your property. Unsecured loans generally attract higher interest rates, especially if you have impaired credit (for example, due to default notices or CCJs).

Please take a look at the information we provide for each solution, and the applicable fees. There are various options that exist to help you deal with your debt problems. These include: Individual Voluntary Arrangements (IVAs), Bankruptcy, Debt Relief Orders, Debt Management Plans, and Debt Consolidation (Subject to suitability and criteria). Entering a debt solution will affect your credit rating. 

If you live in Scotland, the solutions are different, please visit Scottish Debt Solutions.

How has Debt Consolidation helped others?

This is a testimonial from Bob, a customer who was able to avoid bankruptcy and clear his revenue debts with funds raised by a secured loan:

“I had ignored my financial affairs, had significant tax debts and was facing possible bankruptcy. The Revenue were owed £43,650 which related to VAT and self assessment tax and penalties for a period from March 2009 to April 2015. The TDA team asked HMR & C to hold action for 3 weeks to allow me to look into my options. TDA referred me to Loan.co.uk who were able to help me very quickly secure enough funding through a secured loan to clear my revenue debts. Bankruptcy would have meant I lost all my equity in my property of £170,000. I also had an interest in an investment property which I was able to protect. I learnt a valuable lesson and now am up to date with my tax.”

When should you consider debt consolidation?

You could seriously reduce your outgoings by consolidating your debt and having just one affordable monthly payment. In addition, consolidating your debt in this way may help to preserve your credit rating.

What should you consider?

When considering your application, factors that are considered are:-

• Will the loan clear all your debt
• Your credit rating and any defaults that you may have could impact the application
• Your income and outgoings including debt payments plus if you are a homeowner the value of your property and how much is outstanding on your mortgage.

If you are already struggling with debt or have a poor credit rating, the rate of interest charge could be high. This may mean that you pay back far more than you originally owed over a longer period of time.

You also need to consider what might happen in the future. What happens if you lose your job, or interest rates go up

If you cannot meet the payments, the total you will owe will not only include the loan but all the interest payments outstanding as well.