What is Remortgage Debt Consolidation?

what is remortgage debt consolidation - ratewise
by ratewise

Our financial situation can change based on several reasons, this could, in turn, cause you to struggle while paying back your debt. When struggling to make ends meet we need to get a grip on our finances.

Situations like this are very stressful especially when you are falling behind on your debts and the interest is piling up. This can seem like a situation that is very hard to get out of and soon it can bankrupt you.

But for the people who have their own home and are in this situation there could be a solution, which may not be pretty but can be very effective in dealing with this sort of situation.

You could use your home to get a secured loan or a remortgage debt consolidation and it will help you get out of this pickle. The one thing you will need to understand is this may end up making the total credit charge for the long term higher when compared to your current short term arrangements.

Remortgage rates for debt consolidation

For many of us getting a loan or using our credit card to pay off debt may seem like a good option. But the problem with such loans is they often have a very high interest rate.

This is because there is no collateral for these types of loans so the banks tend to charge the user a very high interest rate.

But for those who have their own home they can think about getting a second mortgage also known as a remortgage. By taking out a remortgage against your house it may give you the best interest rate.

This is because you are putting something as collateral when getting remortgage for debt consolidation. Since the interest rates are lower you will have less trouble paying your bill each month.

Think about consolidating most of your debts, in this way you will be paying less on interest and will end up saving money on your loan repayments. This is a great option as paying your debts will be less of a burden for you.

How does remortgage debt consolidation work?

The main criteria of remortgage debt consolidation are you take out a much more secured loan which can be a second mortgage or a separate personal loan against your house.

These loans have a lower interest rate which you can then use to pay off your debts. The basic idea is to get one big secured loan with a lower interest rate and pay off the debts with high interest rates completely.

This option to remortgage for debt consolidation is a great option as you can organize your financial situation and it will become much less of a burden for you.

Should you choose remortgage or a secured loan?

The situation of each individual varies. You might think getting a secured loan is better for you whereas getting a remortgage could be a better option for another person.

There is no one size fits all solution here. That is why we have decided to discuss a little about remortgaging and secured loans.

1. Secured loans

A secured loan is something which is your guarantee you will pay and to show your commitment you put your house as collateral. This is often referred to as a second charge on your property.

You need to understand something, if you fail to make the secured loan payments within the specific deadline there are consequences. The best-case scenario is you lose some of your credit ratings and the worst-case scenario is you losing your home.

The possibility of you losing your home is only real when you miss multiple payments of the loan.

They are also a great option when you have a bad credit rating and are struggling to get a remortgage for debt consolidation.

Some people already have a mortgage going on where the interest rate is low and they would not like to change it. They can also get a secured loan in this sort of case.

2. Remortgage debt consolidation

If you are a property owner with a good amount of equity, you can remortgage your home. By remortgaging your house you will be giving up some of the equity and for that, you will be given a fixed amount which you can then use to pay off your debt.

This is the difference between a secured loan and a remortgage debt consolidation. If you are struggling to pay off your debts consider one of these options two fix your situation.

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Categories: Mortgages