If you have lots of payments to make every month and are struggling to afford them, then debt consolidation could be for you.
It’s easily done, for example you pay for some shopping on one credit card, put the payment for your car’s MOT on another, and before you know it your monthly repayments have spiralled out of control.
If this sounds familiar and you’d like to get back on track with your finances, it could be worth looking into debt consolidation.
Used right, it can help you restart your financial life.
What is debt consolidation?
Debts have a sneaky habit of snowballing when you’re not looking.
On top of that, you have to pay, sometimes, hefty sums to multiple creditors each month to cover these debts.
To make matters worse, your credit score could have been affected if you have:
- Missed payments
- County Court Judgements (CCJs)
- Been in an Individual Voluntary Arrangement (IVA)
- Been in a Debt Management Plan
For new lenders, these are warning ‘red flags’ and not all will be happy to accept an application from you. This can cost you time and effort when looking to consolidate debts.
Debt consolidation, in theory, gives you the ability to unite all your debts into one affordable and manageable debt.
It gives you an opportunity to ‘reset’ your debt – and control your monthly outgoings.
At Clever Mortgages, we’ve already helped 1000s of customers who have bad credit. We work with lots of lenders who can provide first or second charge mortgages for people to consolidate their debts even if they have a less than perfect credit score.
Types of debt consolidation
There are two ways you can look at consolidating your debt:
By securing you debts against something you own. If you’re a homeowner this would be via a first or second charge mortgage.
Unsecured loans are simply ones in which you borrow money and agree to a fixed repayment plan, but don’t secure the loan against any kind of property. A standard bank loan, for example, would be classed as an unsecured loan.
How debt consolidation can help to reduce your monthly payments
Debt consolidation can be effective in long-term debt management. The real purpose here is to move your debt to one lender with one affordable payment at a better interest rate.
- You can pay an affordable payment, which could be for a longer period. However, you’ll know you are keeping up to date with the payments and not impacting your credit rating.
- We’ll also help you find a lender with the lowest rate available for your circumstances, potentially enabling you to reduce the interest rates you pay on your existing debts. Additionally, you won’t be dragged down by several interest rates for each debt.
- By keeping up with your new repayments, you could start to improve your credit score. A higher credit score could open up more options in the future.
- With debt consolidation, you can easily track your finances with one affordable monthly payment.
Looking at the big picture, you could use debt consolidation to become debt-free as your existing credit cards and loans will have been cleared once your new mortgage is paid off.
What you should consider before consolidating your debt
Debt consolidation is a good solution for some mortgage customers – however, it’s not suitable for everyone. You should always review the total amount payable through consolidation, not just the immediate savings in terms of a reduced monthly payment.
Please be aware that any unsecured debts consolidated within your mortgage, would then be secured against your property.
Your home may be repossessed if you do not keep up repayments on your mortgage.
How Clever Mortgages can help
At Clever Mortgages, we’ll help you find the best debt consolidation solution based on your circumstances.
Our team of experts will match you with the right lender for your situation. We’ll help you find the best option for you by sitting down together and calculating:
- The grand total of all your debts to determine how much you need to consolidate them.
- How much you need to pay each month for household bills, entertainment, and emergency fund.
We guarantee that your experience will be very different from the lenders who may have rejected you in the past.
We’re here to help, so get in touch now to find out how we can help you get your finances back under control!
Speak to a broker
Christie is a specialist mortgage broker, whose been working for Clever for 6 years. She has been in the financial industry for nearly 11 years which included assisting clients in financial difficulty setting up IVAs.
Call us on: 0800 197 0504