Bring Your Personal Debt Under Control Before Economic Conditions Make It Unmanageable
Britons are still struggling under a mountain of debt with the charity Credit Action reporting that, excluding mortgages, the average household debt in the UK is now GBP 8,144. If households with unsecured loans are included into the figures, the average debt almost doubles, to GBP 15,661.
Figures also show that more and more people are being made redundant and are unable to keep up with repayments on their personal debts, leading to bankruptcy or repayment plans to try to reduce their debts.
The traditional source of debt advice, the Citizens Advice Bureau deals with an average of 8,004 new debt worries every day in England and Wales alone. The bureau also revealed that the average consumer borrowing, in various forms, instead of reducing to sustainable levels, as the government hoped, has significantly increased, the average debt now standing at GBP 4,350 per UK adult, as at the end of the first quarter of 2011.
Much of the individual debt in the UK is on unsecured loans and credit cards. Unsecured borrowing is often charged at high interest rates as the lender has no security or 'collateral' for the loan. For households in this position it may be possible to consolidate unsecured debts onto their mortgage, meaning they can benefit from preferential remortgage rates rather than having to pay high interest rates.
As well as reducing the interest rate charged on the debt, remortgaging also helps streamline finances by consolidating lots of small debts into one monthly payment. Instead of dealing with a number of creditors on loans and credit cards, homeowners only have one payment to make every month. It can also significantly reduce your monthly outgoings which may be ideal if you are struggling to meet your household bills or you've had a wage freeze at work.
Remortgaging can help you to reduce your outgoings to get you through a difficult period and you can then increase your repayments in the future. A remortgage also allows you to combine all your debts onto one preferential interest rate; for example a fixed rate.
If you're planning to remortgage it is advisable to speak to a mortgage broker or financial advisor. When consolidating debts there are lots of calculations be made to establish the most cost effective way of repaying your debts. For example, you may wish to pay the mortgage over a longer term than the debt you're consolidating.
If your credit rating is very low, you may not have a huge selection of remortgage options, but as a general rule most remortgage deals offer lower interest rates than unsecured debts, and so you will still be better off.
Accessing finance through a remortgage deal, in order to consolidate an existing unsecured loan, in these current turbulent financial times might possibly be an ideal option for many homeowners who have found themselves stuck in the hard position of falling incomes and spiralling costs.
by: Howard Ogollegos