Are you looking to consolidate your debts?
Figures from Credit Action in September 2010 revealed that the average household debt in the UK (excluding mortgages) is £8,628. Much of this borrowing is on credit cards or personal loans, many of which are at very high rates of interest.
So, if you are fed up of paying high interest rates, or you simply wish to consolidate all your loans, credit cards and other debts into one simple monthly payment, a secured homeowner loan could be the answer.
Secured Homeowner Loans
A homeowner loan is a personal loan secured on your property. The amount of the loan and the interest rate is typically determined by:
- The equity in your property
- Your income and outgoings
- Your credit history
- The amount you wish to borrow
Secured homeowner loans allow you to borrow against the value of your property in order that you can repay other debts.
Debt Consolidation
Interest rates on credit cards and personal loans are often high. It isnt unusual for a credit card to carry an interest rate of over 20 per cent, which means that a large part of your monthly payment is eaten up in interest.
If you have several credit cards and loans, it can also be difficult to keep track of your payments. You may have a number of direct debits coming out of your bank account which makes your finances confusing and tough to manage.
A debt consolidation loan allows you to repay all your other debts. You will then be left with one monthly payment at an affordable interest rate. Youll have one loan, one direct debit and one lender, making managing your finances easier.
Secured Homeowner Loans: The Key Thing to Remember
When considering a secured homeowner loan, remember that secured debts put your home at risk if you dont keep up your repayments. If you miss payments, the lender can go to court to insist your home is sold to pay back the loan.
Unsecured debts such as loans or credit cards dont impact on your home if you miss payments; a debt consolidation loan secured on your home will.
Remortgage vs. Debt Consolidation Loan
It is sometimes possible for you to remortgage your property to another lender and to borrow additional funds to consolidate your existing debts. However, there are several reasons why a remortgage may not be a suitable alternative for you.
Firstly, you may have a very competitive interest rate on your main mortgage that you want to keep. Remortgaging may allow you to borrow additional funds, but you might lose your great rate with your current lender.
Secondly, thanks to the global financial crisis, remortgaging your property is nowhere as easy as it was some years ago. Banks and building societies have tightened up their lending criteria and it is now much more difficult to secure mortgage finance. To remortgage in the current market you typically have to earn more and have more equity in your home than ever before.
Thirdly, you may not have a perfect credit history. If you do have any missed payments or County Court Judgments (CCJs) on your credit file you could find that banks and building societies are reluctant to lend to you.
Consider a Secured Homeowner Loan
So, if you need to borrow a sum of money to repay your other debts, you should consider a secured homeowner loan. They are quick to arrange, simple to understand and they can save you both time and money.
Debt consolidation loans can be a good option for paying off credit card debt. Borrowers can make one lower payment to a lender by consolidating their bills instead
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