Five Clear Reasons To Use a Remortgage To Wipe Your Unsecured Debt Out
- By Howard Ogollegos
- Published 09/23/2011
- Real Estate
- Unrated
The amount of unsecured debt in the UK has increased substantially over recent years. According to the charity Credit Action, Brits owed a total of GBP 1.454 billion in February 2011 on which we pay GBP 182 million in interest every day. And, as unsecured loans are riskier than secured loans (as the lender doesn't have any security for the loan) interest rates tend to be higher.
One of the ways that many Brits deal with their unsecured borrowings is to consolidate them with a remortgage. You can move your mortgage from one bank or building society to another and borrow additional cash at the same time to repay other loans or credit cards. Our guide looks at the top five reasons why you may want to consider consolidating your debts with a remortgage.
Lower interest rate: Remortgaging can allow you to reduce your interest payments in two ways. Firstly, it lets you benefit from a lower interest rate on your main mortgage. Secondly, it can reduce the interest rate that you are paying on your other debts as you will be charged interest on a low remortgage rate rather than on a higher unsecured rate basis. And, remortgaging can let you take advantage of a promotional mortgage deal such as a discounted or fixed rate.
A remortgage can typically be arranged at an interest rate of 4-5 per cent. This compares favourably with the average credit card interest rate in the UK which was, according to Moneyfacts in March 2010, 18.9 per cent. Remortgaging allows you to borrow money at the lower rate to repay debts at a higher rate.
Spread payments over a longer period: Credit cards are generally designed for short term borrowing whilst personal loans are normally taken out over a period from one to seven years. A mortgage, however, tends to run for a much longer term. This allows
you to spread your repayments over a much longer period, although bear in mind that you may pay more interest in total if you consolidate your debts over a 15-25 year term.
Save time by dealing with one creditor: If you have several credit cards with balances or one or more personal loans it means that you are likely to have a number of different financial services companies to deal with. So, dealing with all of them - for example to change your bank details or address - can be time consuming.
This can save you time and be far less frustrating than having to telephone several lenders each month to deal with your accounts. It can also reduce the amount of paperwork that you need to store over the years, which helps those who are self employed when sending paperwork to the accountants.
One direct debit: As mentioned, the debts can be repaid on your payday as part of your mortgage. Instead of paying several direct debits to several companies (for personal loans store cards, HP on a car or for the monthly minimum instalment on your credit card), by consolidating debts through a remortgage, it means that you will be liable for just one payment going out of your bank account every month.
Lower repayments: A Remortgage deal generally allows you the option to borrow at a lower rate of interest than an unsecured loan would over a longer period of time. Banks do not like unsecured debt because the risk of default is higher, so they want to make you pay more for the bad customers they inevitably attract. Secure your debt and your monthly debt repayments will be much lower.
If you are hoping to slash your monthly debt burden or if you wish to consolidate debt into a single monthly affordable payment, getting a remortgage could be the ideal way to achieve this. However, it is important to remember that if you are securing previously unsecured debt, you are placing your home at risk if you fail to keep up your repayments.
One of the ways that many Brits deal with their unsecured borrowings is to consolidate them with a remortgage. You can move your mortgage from one bank or building society to another and borrow additional cash at the same time to repay other loans or credit cards. Our guide looks at the top five reasons why you may want to consider consolidating your debts with a remortgage.
Lower interest rate: Remortgaging can allow you to reduce your interest payments in two ways. Firstly, it lets you benefit from a lower interest rate on your main mortgage. Secondly, it can reduce the interest rate that you are paying on your other debts as you will be charged interest on a low remortgage rate rather than on a higher unsecured rate basis. And, remortgaging can let you take advantage of a promotional mortgage deal such as a discounted or fixed rate.
A remortgage can typically be arranged at an interest rate of 4-5 per cent. This compares favourably with the average credit card interest rate in the UK which was, according to Moneyfacts in March 2010, 18.9 per cent. Remortgaging allows you to borrow money at the lower rate to repay debts at a higher rate.
Spread payments over a longer period: Credit cards are generally designed for short term borrowing whilst personal loans are normally taken out over a period from one to seven years. A mortgage, however, tends to run for a much longer term. This allows
Save time by dealing with one creditor: If you have several credit cards with balances or one or more personal loans it means that you are likely to have a number of different financial services companies to deal with. So, dealing with all of them - for example to change your bank details or address - can be time consuming.
This can save you time and be far less frustrating than having to telephone several lenders each month to deal with your accounts. It can also reduce the amount of paperwork that you need to store over the years, which helps those who are self employed when sending paperwork to the accountants.
One direct debit: As mentioned, the debts can be repaid on your payday as part of your mortgage. Instead of paying several direct debits to several companies (for personal loans store cards, HP on a car or for the monthly minimum instalment on your credit card), by consolidating debts through a remortgage, it means that you will be liable for just one payment going out of your bank account every month.
Lower repayments: A Remortgage deal generally allows you the option to borrow at a lower rate of interest than an unsecured loan would over a longer period of time. Banks do not like unsecured debt because the risk of default is higher, so they want to make you pay more for the bad customers they inevitably attract. Secure your debt and your monthly debt repayments will be much lower.
If you are hoping to slash your monthly debt burden or if you wish to consolidate debt into a single monthly affordable payment, getting a remortgage could be the ideal way to achieve this. However, it is important to remember that if you are securing previously unsecured debt, you are placing your home at risk if you fail to keep up your repayments.
Howard Ogollegos
Howard O'Gollegos writes for JustCommercialMortgages.com the UK's No.1 site for the latest commercial mortgage rates and commercial property finance news.
View all articles by Howard Ogollegos