What is Debt Consolidation? This is a way of putting all of your debts together and turning them into one single monthly repayment. A debt consolidation home loan can allow you to pay out any outstanding credit cards, car loans and personal loans at the same interest rate that you pay your mortgage. So, instead of having multiple debts, why not just have one?
Refinancing to a debt consolidation loan involves you reviewing your existing debts (including your mortgage) and combining them into a new mortgage so that you have one easy monthly repayment instead of the having several.
Many people consolidate their debts so they can make their loan repayments more affordable. But before you head down this path I want to be able to provide you with a few Pros and Con
PROS
- SAVE MONEY – a home loan interest rate will typically be a lot lower than the interest on your credit card, car loan and personal loan. So switching to one loan (with a lower interest rate) may reduce your repayments and can also mean less fees.
- EFFORT – Instead of having to deal with several lenders this way you only have to deal with one. This means less paperwork and less phone calls when you have questions. Let’s face it we all like to save time!
- ONE SIMPLE MONTHLY PAYMENT – managing debts can become much easier when you only have one payment to make
CONS
- YOU CAN ACCUMULATE MORE DEBT IF YOU’RE NOT CAREFUL – when you put your debts together you free up your credit. This might make you think you can spend more but as a result you end up with more debt than before.
- YOU MAY PAY MORE OVERALL – a longer loan term can mean you end up paying more over a longer period.
- FEES AND CHARGES – some loans may have early exit fees and new ones may have application fees.
Before you make a decision there are a few things you may need to know and that is why it is important to seek the advice of a professional mortgage broker, so you can discuss what options are best for you. Here at Lime Mortgage Brokers we are always here to help. So if you have any more questions about the information we have provided please do not hesitate to contact me.
