Debt Consolidation Home Owner Loan | What You Need To Know
If you owe money to a number of different lenders at varying interest rates, and you own your own home, either outright or mortgaged, then a debt consolidation home owner loan could be for you.
A debt consolidation home owner loan works like a refinance loan or remortgage. You effectively use your debt consolidation home owner loan to reorganise or simplify your finances, pay off other debts and free up cash. You might also benefit from better terms and conditions on your loan such as lower APR or longer or shorter repayment period depending on what you need.
Weigh up the pros and cons
The benefits of a debt consolidation home owner loan could include getting a better interest rate and terms than you are currently paying. For example, if interest rates have dropped since you took out your initial loan a debt consolidation home owner loan could mean that you pay a cheaper rate of interest. It also means you can have all your debts rolled together and pay just one monthly sum.
Before committing to a debt consolidation home owner loan it is a good idea to look closely at your financial situation. You should check the interest rates you are currently paying on other loans and check the deals on the market to see if a new loan will offer you a better rate. If it does you also need to look at how long you will be repaying your debt consolidation home owner loan for and work out the total amount of interest you will be paying over the term.
When assessing your suitability for a debt consolidation home owner loan, lenders will look at your credit history, your income and your personal circumstances such as the amount of equity in your property. A debt consolidation home owner loan will be secured on your property and can be referred to as a "secured loan". This means that if you default on repaying the loan you could lose your home and an advert for a debt consolidation home owner loan will include the warning "Your home may be repossessed if you do not keep up repayments on your mortgage."
Read carefully before signing
When taking out a debt consolidation home owner loan you will be asked to sign a credit agreement, which you should read carefully as the terms are legally binding. The amount you borrow on a debt consolidation home owner loan will be repaid monthly over a term agreed at the outset, usually between three years and 25 years.
If you are married or in a civil partnership a lender might insist both parties are named on the debt consolidation home owner loan application from. This is because there have been cases in the past where one party took on a secured loan and defaulted, but when the lender tried to force a sale of the property, the other party was able to block it by claiming to be in ignorance of the loan.
