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Is debt getting you down? Do you feel like you’re juggling ten different payments a month with only two hands? Consolidating your debts into one monthly payment could help you get back on track and manage your monthly budget better.
Many people remortgage to consolidate each year, but is it the right decision for you? More importantly, are you eligible for a remortgage deal?
Believe Money helps people like you secure borrowing solutions, even when a mainstream lender turns you down. Our specialist brokers can find the right remortgage deal regardless of your personal circumstances.
What is debt consolidation & how does it work with remortgaging?
Debt consolidation doesn’t remove your debts but instead merges all outstanding payments into one monthly repayment. For example, if you owe money across five credit cards and are also paying back a personal loan, you might struggle to stay on track with the monthly repayments.
Consolidating debts essentially pays off all your debts from other providers and gives you one monthly payment amount you’ll contribute each month until you pay the loan – plus interest – in full.
So, if your debts equal £5000, you can get a loan for that amount without worrying about balancing different accounts each month.
While personal consolidation loans are highly popular, a debt consolidation remortgage is an alternative to this borrowing solution.
How does remortgaging for debt consolidation work?
If you’re a homeowner, you can release some of the equity in your home and take out a larger mortgage to cover the amount you take out. There are two remortgaging options: a second charge loan and a complete remortgage agreement.
Second charge loan: This type of loan depends on how much equity you own in the property, as you’ll borrow against the amount.
Complete remortgage: If you want access to more lenders, you could try a full remortgage, which releases equity and gives you cash to consolidate debts.
A complete remortgage means you’ll move onto a new deal, which could mean better interest rates and payment terms. However, that’s not a guarantee. Some people choose a second-charge mortgage because they’re already on a good deal.
While this often means they’ll have to pay two separate mortgages a month, it could save money when the rates of the original mortgage are better.
Equity release options
If you’re 55 and over, consider using an equity release instead of applying for a debt consolidation mortgage. Equity release simply releases capital tied up in a property in monthly amounts or a lump sum.
While this option could benefit some people, it’s important to remember that the money you spend will be taken out of your estate when you pass away or enter long-term care.
Also, you won’t be able to do an equity release unless you’re 55, so remortgaging for debt consolidation might be the only available option.
The pros of a debt consolidation remortgage
Debt consolidation mortgages have a range of benefits, and they’re ideal if you want to release some money to pay for debts. Here are some of the main advantages associated with remortgaging for debt consolidation.
Manage debts better
Balancing your debts is challenging, especially when they’re spread out over numerous lenders.
By consolidating those debts into one repayment, you’ll know exactly where your money is going each month and won’t have to worry about interest rates increasing unexpectedly.
A debt consolidation loan increases your credit score
Whenever you want to loan money or make a large purchase, the seller will check your credit file to see if you’re a suitable candidate. A poor credit score can significantly impact your financing options in the future and exposes you to high-interest rates.
When you consolidate your unsecured debt and offer one monthly payment, you’ll gradually increase your credit rating and have more options in the future.
Dealing with credit card debt can feel like a massive weight on your shoulders, and loan repayments are the same. Many people find they’re just about able to make ends meet, but from essential living expenses to credit card debts, there’s little left over.
Taking out a consolidation remortgage is easier to budget, and you likely have a higher income.
The cons of a debt consolidation mortgage
Now we’ve covered the pros of remortgaging your property and consolidating debt, it’s time to explore some disadvantages. These cons aren’t intended to put you off but rather give you all the necessary information to make the right decision.
Secured borrowing has risks
While unsecured borrowing comes with hefty interest and fewer options, a secured loan uses your property as collateral. You could lose your home if you can’t keep up with the monthly repayments.
It rarely happens, but if it does, you’ll risk your future security and find it hard to rent or buy a property.
You could get a worse deal
If your existing mortgage offers lots of benefits, you might find that moving onto a new deal could impact your financial stability.
For example, your current mortgage provider might offer a fixed interest rate, so if they’re not willing to remortgage for the same rates, you’ll be better off with a second-charge mortgage.
You’ll still have to manage your monthly payments
Balancing your monthly outgoings correctly will be central to managing the loan. Once you clear other debts, you’ll still need to budget for the repayments, or you’ll get into trouble with the new mortgage deal.
Am I eligible for a debt consolidation remortgage deal?
If you’re a homeowner with viable property equity, you could get a remortgage deal. However, lenders have eligibility criteria in place to protect them.
For example, constantly defaulting on your debts might raise red flags for providers because they want to offer money and know they’ll receive it back.
Here are some of the things that might impact your eligibility:
Do you have a poor credit rating?
Your credit history does matter, and lenders will always prefer applicants with good to excellent scores. However, bad credit doesn’t necessarily mean you won’t find a lender, but some will introduce higher interest rates.
How much equity do you own?
Second-charge mortgages depend on the equity you own. For example, if your home is worth £350,000, but your existing mortgage accounts for £250,000, your maximum loan amount will be £100,000.
Are you ready to commit to the loan?
Defaulting on mortgage payments is never a good idea, so it’s important to consider whether you’re ready to commit to the loan before signing on the dotted line.
Choose the right debt consolidation mortgage deal with Believe Money
Consolidating debts could be the best decision because the right lender will help you manage your money and enjoy more financial flexibility. If your existing lender doesn’t offer a good deal, a professional mortgage broker can help you access more providers.
Believe Loans is one of the UK’s most reputable brokers, offering people free debt advice and partnering with multiple lenders to ensure our clients get the best financing agreement for their needs.
We understand the emotional impact of financial difficulty and go out of our way to help you consolidate debt and enjoy a new mortgage.
We partner with specialist mortgage lenders
The biggest issue with mainstream lenders is that they have set criteria to determine someone’s eligibility. If you don’t tick all the boxes, the lender will probably decline your application.
Specialist mortgage providers have different lending criteria, where they judge people on a case-by-case basis. Our specialists have strong relationships with lenders that work with people with poor credit scores or unique needs.
Your mortgage advisor will evaluate your case and help you find the right loan for your needs.
Zero upfront fees
Nobody wants to find a new mortgage lender and then worry about paying broker fees upfront. Unfortunately, many brokers introduce upfront fees anyway, but we’re different.
As part of our commitment to customer service, we guarantee you won’t have to pay anything immediately.
Instead, we’ll add our small fees onto your mortgage debt, ensuring you can factor it into your monthly repayments.
Work with an award-winning company
We’re proud to say that Believe Loans is an award-winning second-charge mortgage broker. Much of our success is attributable to the level of customer service we offer and our commitment to providing mortgage borrowing solutions for everyone.
When you work with us, you can guarantee a service tailored to your unique needs.
Get a free consultation with a mortgage advisor today
Personal loans can impact your financial situation, but a debt consolidation remortgage will give you more stability and flexibility. If you’d like to explore your options, please feel free to contact our friendly team for a free, zero-obligation consultation.
In just a few minutes, you could be on your way to consolidating any existing debts and looking forward to a future with more possibilities.
How It works
Simple, easy application
We search our panel of lenders to find the deal that’s right for you
When you confirm your chosen deal, we get your application moving
The money lands in your bank
account – usually within two weeks
Believe is powered by Clicktech
We want you to get your quote quickly and start your loan journey as soon as you’re ready. So we’ve developed a powerful technology platform, called Clicktech, that makes the process fast and efficient with you in control.
Following a chat with one of our friendly advisors, we link you to our simple online portal where you can enter the brief information we need. We then search our panel of over 800 lenders and deliver the most competitive quotes quickly and easily, in moments.
And once you’ve made your choice, Clicktech keeps things moving, helping you get your money in as few as ten days.
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