Debt Consolidation for Homeowners

A secured loan (sometimes referred to as a homeowner loan) works by using the equity within your home as security against the loan that is lent to you. This means that lenders have less risk to contend with regarding the loan defaulting. They can therefore give more flexibility with regards to the loan features.

With careful planning and responsible financial management, you could use a secured loan to get out of debt and achieve financial stability.

There are many reasons why people end up with multiple debts.

Unforeseen life events: Unforeseen life events such as illness, job loss, or divorce can contribute to being in a situation where you end up with multiple debts. When experiencing a financial setback, you may have had to turn to credit cards or other forms of borrowing to make ends meet.

Interest rates: High interest rates on credit cards and other types of borrowing can also contribute to multiple debts. If you are unable to pay off a debt with a high interest rate, the charges can quickly build up and this can make it hard to pay off.

Homeownership expenses: The recent cost of living crisis in the UK can have an impact on your  outgoings; for example, mortgage payments, bills, and other maintenance costs. If these expenses become unmanageable, you may have had to turn to credit cards or other forms of borrowing to pay for these expenses.

If you have bad credit, then you could still apply for a secured loan. The risk on a secured loan is considered less to lenders because your home is being used as security. This means that lenders are not as strict on your credit score eligibility.

Sometimes your credit score can be negatively affected by the following reasons:

Bad credit, CCJs and mortgage arrears: Sometimes trying to manage multiple debts can result in negatively affecting your credit score and this can lead to:

• Default or late payments: If you default or make late payments on your mortgage, credit card, or other loans, it can negatively impact your credit score.
• High levels of debt: If you have high levels of debt, it can negatively impact your credit score, particularly if you are using a high percentage of your available credit.
• County Court Judgments (CCJs): If you have unpaid debts that are taken to court, and a CCJ is issued against you, this can have a negative impact on your credit score.

If you have found yourself in any of the above scenarios then you still could be eligible for a homeowner loan. You can speak to one of our advisers who will be able to determine your eligibility before you actually apply for the loan.

Personal Loan: You can take out a personal loan (also known as an unsecured loan) to consolidate your debts. With a personal loan, you’ll receive a lump sum of money that you can use to pay off your existing debts. You’ll then have a single monthly payment for the personal loan. Typically the eligibility criteria on a personal loan are much stricter than a secured loan. This is because the lender doesn’t have an asset such as your home, to secure the debt against.

Balance Transfer Credit Card: You can transfer your existing credit card balances to a new credit card with a 0% introductory APR. This can give you time to pay off your debt without accruing additional interest charges. However, you’ll need to pay off the balance before the introductory period ends to avoid high interest rates.

Typically the above two options tend to have shorter payback periods than a secured loan which can mean that the monthly repayments can be higher.