Debt consolidation is a common method of managing your financial liabilities. With this approach, you take out a loan in order to pay off multiple debts, such as credit cards, personal loans, and other outstanding balances. Debt consolidation mortgages are a popular version of this financial strategy. However, it is essential to understand the pros and cons of this approach before making the decision to use one.

What are the pros and cons of a debt consolidation remortgage?

One of the pros of consolidating your debt using a mortgage is that you can reduce your overall interest rates, especially compared to credit card debt. The high-interest rates on credit cards can accumulate quickly, leading to a longer period of time needed to pay off the debts. Conversely, a lower interest rate on mortgages makes them a more desirable option for consolidating loans, giving you the potential to pay them off sooner.

Another benefit of debt consolidation mortgages is that they can lead to more disposable income thanks to the lowering of monthly outgoings. This can help you to save money, and ultimately put you in a better financial position.

However, there are also some cons to consider. One of these is the term of the debt, as mortgages are typically taken out over a longer period than a loan. Evidently, this could lead to paying off higher amounts over a longer duration.

Furthermore, some may find that there are fewer options available to them when trying to secure mortgage deals that consolidate their debt. This is due to certain factors, including missed payments and high-risk lifelines, which can impact their credit profile.

Another key risk is that your home is used as collateral when taking out a debt consolidation mortgage. This means there's always a risk of losing your property if your finances spiral, and bankruptcy may be your only option, which would also lead to losing your home.

Credit Profile

A poor credit rating can decrease your chances of having various remortgage deals available to you, this is due to the bad credit you may have on your credit file. This may mean you end up paying more interest as the rates available to you may potentially be higher than other deals, there may also be less interest rates for you to apply for. A mortgage adviser will be able to help you with this especially if you are looking to turn your bad credit into good.

Are there many options available?

If you're considering debt consolidation, it's essential that all potential options are carefully considered before moving forward. A mortgage broker or companies that offer free debt advice can be helpful in your decision-making process. You should also bear in mind that consolidating your debts all comes down to your own personal circumstances.

When it comes to choosing a debt consolidation mortgage, it's important to take into account your monthly payment, as well as your existing mortgage repayment and the total amount you'll be expected to pay back. A poor credit rating can also decrease your chances of finding suitable remortgage deals, potentially leading to higher interest rates and fewer options available to you.

In conclusion, choosing to consolidate your debt with a mortgage requires a great deal of thought and analysis of the risks and benefits. It's important to seek professional advice and only proceed if you're confident that it's the right financial decision for your circumstances.

If you are looking to discuss your financial situation when it comes to debt consolidation remortgages, call us today on 01516620188 or email [email protected] for more information.