Debt Consolidation Loans
The Debtsolver best advice model will determine whether a loan is right for you, given your unique financial circumstances. If a loan is the right way to solve your debt problem, then you will be advised as to which type of loan is the most appropriate for you. There are 3 categories of lending that could be appropriate.
Consolidation Loan
A consolidation loan may be a solution to reduce your monthly outgoings, thereby helping to relieve the burden of increasing debt.
A consolidation loan is designed to pay off all your existing debts - including credit card balances & personal loans - and offers a lower more affordable monthly payment.
This might not be available to you, if you are experiencing serious financial difficulties due to a poor credit rating.
A consolidation loan is only suitable for lower levels of debt. It is not advisable if you have larger debts because it is more likely to worsen your situation.
More often than not, a consolidation loan amalgamates your unsecured debts and secures them on your property. If you have a serious debt problem, you have just significantly increased your risk. Now if you default, your house is at risk.
Re-mortgage
A re-mortgage is often the obvious answer to an unsecured debt problem. Given the huge property price boom in recent years, for those debtors who have not already released equity from their home, releasing equity at a low rate of interest to repay expensive credit card debt to reduce your monthly payments can be a good solution.
Set up fees can be high, so always ask how much the fees will be.
You must always consider the risks of effectively securitising unsecured debt on your home.
Your debts are now repayable over the life of your mortgage, say 25 years.
Additionally, the future trend of interest rates must be taken into account to ensure that ongoing mortgage repayments are affordable.
Many lenders have recently tightened their lending criteria and it may no longer be possible for you to raise sufficient funds against your property to repay all of your unsecured debts.
Secured Loan
There are times when it makes sense to take out a Secured Loan instead of a re-mortgage:
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If the re-mortgage is going to incur a large redemption penalty charge
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They can be short term loans (3 years) to suit a short term problem
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Equity release can often be achieved more quickly than a re-mortgage
However, always consider the following:
Debtsolver considers that, in the main, taking on further debt rarely improves your predicament, and in most cases you cannot borrow your way out of debt. Do not be fooled by the feel good factor of reduced monthly payments.
If you have secured your debt against your home you could be paying for the debt for the next 20 years or so, and whilst your monthly payments may be more affordable the long term cost of the borrowing will be significantly more. Always take the
debt advice of a professional.
If a loan is the appropriate solution for you, Debtsolver will refer you to a professional finance company who will offer you a solution that satisfies your need.
If you would like more information,
ring Debtsolver now on Telephone 08000 434 336 (Free for UK residents only).
