Consolidation Loan

What is it?

A consolidation loan is a loan which allows you to combine all your existing credit agreements, such as credit cards, store cards and personal loans into one. You will then make repayments to a single lender.

A consolidation loan may also give you the opportunity to repay your existing debts over a longer period of time.

Who is it for?

  • A consolidation loan is for people who are having trouble re-paying credit cards, loans etc and want to consolidate these together to just pay one lender a set monthly amount.
  • People without county court judgements.
  • People with a good credit rating.
  • People with a permanent residence.
  • People with a reasonable level of surplus income to meet loan repayments.

The Process

Before taking out a consolidation loan it is vital that you compare the interest rate being offered by this new lender to those rates being charged by your existing lenders. Other questions you should ask yourself or any potential lender include:

  • What are the monthly payments and can I afford them?
  • Do the lower rates of interest apply for the whole period of the loan?
  • What is the total cost of the consolidation loan?
  • What is the period of the consolidation loan?
  • Are there any upfront fees or periodic charges – such as late payment charges?

Consolidating Personal Debt

Be particularly careful if the consolidation loan is to be secured on your house, as failure to make the repayments may cost you your home.

Whilst care should be exercised before consolidating debt, the practice can be of use if they reduce the amount paid each month in interest provided they do not come with onerous repayment terms or put you at risk of losing your home.

Although Chamberlain & Co does not itself provide consolidation loans, we do have contacts with various financial institutions, finance brokers and independent financial advisors who can provide details of available loans.

Advantages of consolidating debt

  • Ability to deal with one creditor rather than numerous creditors.

Disadvantages

  • Length of time to settle consolidation loan.
  • Interest on consolidation loan may be higher than a normal loan.
  • As paying off debt over a longer period of time, this may result in a greater overall amount payable.

Remortgage

What is it?

The aim of a remortgage is to change the terms of your existing mortgage and usually, but not necessarily, involves switching to a new lender without moving home. A home owner with existing financial difficulties might consider a remortgage to:

  • Reduce their monthly mortgage payments – by taking advantage of lower interest rates or by extending the period of their mortgage.
  • Consolidate their secured and unsecured debt into one loan at lower interest rates.
  • To repay debts such as personal loans or credit cards.
As with consolidation loans, it is vital that you consider the relative rates of interest for the whole period of the loan, not just the first few years. Other questions you should ask yourself or any potential lender regarding both the existing and prospective loans include:
  • What are the monthly payments of a remortgage and can I afford them?
  • What is the total cost and duration of the remortgage?
  • Are there any penalties for early redemption of the loan?
  • Are there any restrictions preventing a subsequent remortgage?

In addition, remember there may be substantial upfront costs involved in personal remortgaging, including valuation fees, arrangement fees, legal fees and so on.

Particular care should be taken if you are increasing the level of your secured debt as failure to make the increased payments on your remortgage may cost you your home.

Who is personal remortgaging for?

  • Personal remortgaging can be of use to individuals in financial difficulties if they genuinely reduce the costs of borrowing, without significantly the risks of losing your home. However, as indicated above they do require careful consideration, particularly of the small print.
  • People with large amounts of equity in their property.

The Process

Although Chamberlain & Co does not itself provide remortgages, we do have contacts with various financial institutions, finance brokers and independent financial advisors who can provide details of available loans.

Advantages

  • Not a formal insolvency process.
  • Security of the amount to be paid.

Disadvantages

  • Interest rate may be variable and may increase.
  • Involvement of sub-prime lenders.
  • Home may be at risk.

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