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UK Credit Card and Debt Consolidation Loans
**Please note these
articles are for informational purposes only and do not represent financial
advice either from the author or Purposeloans.co.uk
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 life 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 payments.
Documentation.
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.
Electricity bills.
Gas bills.
Water bills.
Marriage certificate.
Passport.
Driving licence.
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 outstanding amounts.
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.
Caution
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 yourself
unemployed.
If you need some help in deciding to be disciplined just consider what your life
will be like if your home is repossessed.
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.
Summary
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
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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
John Grayson
If you want to learn more about debt consolidation loans please visit the
following web site. http://www.ukmortgagewithbadcredit.com
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