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Could Debt Consolidation Help You Take Control of Your Finances?

Have you already broken your New Year’s resolution to take better control of your finances? January can often feel a little blue, especially if you are amongst the millions of people nursing a post-Christmas financial hangover.  Rather than fretting, there are positive steps you can take to reduce your monthly outgoings.  One such way is debt consolidation.  

Are you juggling with costly unsecured borrowing (on store or credit cards for example)? Then it is likely that you will be paying significantly more interest. Therefore you may be making higher monthly payments than if you were to consolidate your borrowing into one secured loan. 
 
When you consolidate debt, not only can you reduce your monthly outgoings, you can also put in place an achievable plan to pay back what you owe.
 
How does a debt consolidation mortgage work?  Typically, you take out a mortgage that is large enough to pay off an existing mortgage, whilst also covering other existing debts.  There are two main options: Remortgage or Second Charge Mortgage.

Remortgage

A remortgage allows you to switch your existing mortgage and any other outstanding debt to a new deal.  This could either be with your existing lender or a new provider.  The new mortgage is secured against your existing property.
 
Key Benefits: 

  • Reduces your outgoings to one monthly commitment, making it easier to budget.
  • Provides better rates than on standard loans/credit cards etc., helping you to pay off your debts quicker. 

Considerations:

  • Whilst a remortgage could save you money each month, you may have to pay charges and fees to both your existing and new lender. 
  • However, Ingard can help with this – as a ‘whole of market’ mortgage broker, we can assess every available product and recommend the best possible solution for your requirements.

Second Charge Mortgage

Your second charge mortgage, also known as a ‘secured loan,’ works just like a normal mortgage. It is secured against your current property, however, the loan is granted by a different lender, on different terms.  This gives you the freedom to secure the best deal, without changing your existing mortgage provider.

Key Benefits:

  • Second charge lenders tend to be more flexible, which can be beneficial in certain situations, for example, some lenders may be prepared to offer a higher maximum loan amount or consider individuals with a poorer credit rating.
  • If you have a great deal on your current mortgage and want to keep it, a second charge will not impact on this.  

Considerations:

  • Second charge mortgages tend to incur higher rates than traditional mortgages. Therefore, you may end up paying more than if you opted for a remortgage. 
  • You may also have to pay a slightly higher arrangement fee to the provider. 
  • When you consolidate debt, it is transferred from unsecured to secured debt. 
  • Your home may be at risk if you fail to keep up repayments on a mortgage or other debt secured against it.  You should also consider that whilst spreading your debt over a longer period will save money each month, you may end up repaying a higher total amount.

Get 50% Off Our Broker Fee This January
With a quick call to Ingard, we can help you get your finances back on track. 

Considering a remortgage for debt consolidation purposes? You can get 50% off our mortgage broker fee* when you make an application with us before the end of January.  To claim your discount, call us on 01702 533 400 or email info@ingard.co.uk, quoting reference here.