If over the years you have built up debt, in the form of credit cards and loans, you may be considering a debt consolidation loan to reduce your overall monthly commitments and take away money stresses, however there are reasons for and against doing this, which you need to be fully aware of:
Reasons for consolidating your debts:
- Reduce your monthly payments to free up more disposable cash each month
- Make life easier by having only one payment to make rather than juggling multiple debts
- Have a clear repayment structure over X years to clear your debts rather than simply making the minimum payments each month
- You may get a lower interest rate when compared to expensive rates on credit cards and mail order catalogues
- Use it as an opportunity to cut back on your spending and get back on track
- Start to rebuild you credit score
Reasons against consolidating your debts:
- You may be extending the term of the debt which could cost you more in the long run
- By taking out a loan against your home, if you don’t make the repayments, your home could be repossessed
- Improving your credit profile takes time
Another option to reduce your outgoings is to consider is a Debt Management Plan. Step Change is a debt charity who offer free advice in this area.
It is important that you consider all the above points and seek advice. At The Money Hub we can give you advice on debt consolidation loans, so please get in touch via Phone, Social Media, Email or WhatsApp.
Frequently asked questions:
Should I consolidate my debt before applying for a mortgage?
Possibly yes, however it is advisable to a speak to a qualified mortgage adviser to give you advice around this before taking out any debt consolidation loans. The key to a new mortgage is your credit profile, affordability and deposit/equity.
Is it a good idea to consolidate debt into a mortgage?
The answer to this question purely depends upon your circumstances and all the points above need to be considered. You should seek advice from a qualified mortgage adviser to help you reach the right decision.
DISCLAIMER: These articles are for information only and should not be construed as advice. You should always seek advice prior to taking any action.