UK Credit Card and Debt Consolidation Loans
Written by: John Grayson
Your current situation.
You have got several credit and store cards and several
loans. You are finding it difficult to make the payments
each month. Generally you do make the required payments but
this means that other parts of your like are suffering.
You've got no spare cash for the occasional night out or
weekend away. Even making the minimum payments each month
means that the outstanding amounts are never reducing.
The equity in your house.
If you have owned your house for several years there is a
chance that you have something called equity. This is the
difference in the current value of the house and the total
amount of the outstanding mortgage. So if you have an
outstanding mortgage of £80,000 and your house is now valued
at £170,000 you have got equity of £90,000. There are
certain companies that will lend you money based on this
equity. They are safe and secure in the knowledge that if
you default on your payments that they can get their money
back by selling your house. That's the small print "Your
home is at risk if you do not keep up payments."
You can use this new loan to pay off all your current credit
cards and loans and have a reduced monthly payment. This
method of using the equity in your house is called loan consolidation.
Current loans and credit cards
Lets says that the total amount outstanding on you credit
cards, store cards and loans is £20,000. If the equity on
your house is £90,000 you should have no problem getting a
second mortgage of £20,000. However you will still need to
be in employment and prove that you can make the monthly
Before you apply for a second mortgage with the intention of
paying off your existing debts you should get all your
paperwork together. This will save you time and make the
loan process much quicker. Here is a list of the
documentation that you will need. Different loan companies
will ask for different things so just get all the documents
together ready for whatever they want.
Last three months payslips.
Last three months bank statements.
Council Tax bills.
Not all those documents are essential but it will slow the
process down if you don't have them available.
You'll also need full details of the credit cards, store
cards and loans that you want to pay off. This includes the
name of the companies, the account numbers and the
The new company will actually issue with individual cheques
that you send to these companies, you don't actually get a
cash payment to yourself.
Let's say that your loan application has now been processed,
you have paid off all those outstanding debts. The weight
has been lifted off your shoulders. You now need to be very
careful. If you run up any more debts at this point in your
life then you will be in deep trouble.
Make sure you cut up and return all but one of your credit
cards. You need to keep one so that you can use it for
purchasing things on the internet and making hotel
reservations etc. Maintaining one credit card will ensure
that you keep a good credit history. Do not apply for any
new credit cards or loans.
Your monthly payments on the new loan will be significantly
lower than the total of your previous credit card payments.
But, you need to take advantage of this situation, it is no
use spending the extra money on useless luxury goods. You
have to use this opportunity to stabilise your financial
life. I suggest that you save at least half of the extra
money that you now have each month. This will give you the
chance to build up a buffer in case you suddenly find
If you need some help in deciding to be disciplined just
consider what your life will be like if your home is
The bad news
Although your monthly payments are now lower, the reason for
this is that you will be paying the loan off over a much
longer period. This is how the loan companies make their
money. And because you are paying the loan off over a much
longer period you will also be paying a lot more than the
value of the actual loan. For this reason it is vitally
important that you discuss all possibilities with your
Independent Financial Advisor.
Getting a debt consolidation loan can relive you of a lot of
stress and worry. But this comes with a long term financial
penalty. It is thus vitally important that you don't run up
any more debt. Work at paying off that loan as quickly as
possible and regaining your financial freedom. For more
information visit: www.ukmortgagewithbadcredit.com
Disclaimer: Please note, I am not a Financial Advisor and
this article is for informational purposes only. You MUST
consult with an Independent Financial Advisor before
entering into any financial agreements.
About the Author
If you want to learn more about debt consolidation loans please visit the following
web site. http://www.ukmortgagewithbadcredit.com
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