Why not consider debt consolidation as a last resort
Households seem to be more dependent on credit to get through the cost of living crisis. If you own a home with multiple credit commitments, debt consolidation through a secured loan could help.
Borrowing is on the rise and at a blistering pace too, according to the latest money and credit statistics from the Bank of England. He revealed Britons borrowed a further £1.8bn in June on the net, double the £900m recorded the previous month.
As more people seem to rely on credit as the cost of living crisis deepens, borrowers may find they pay off multiple credit cards, store cards, personal loans and overdrafts in one go. one time.
It can be difficult to manage multiple credit commitments at once, not to mention the high cost of servicing high monthly interest rates on some loans.
But, if you own a home with good equity and a good credit rating, you might consider a second mortgage – also known as a homeowner’s loan – which is financing secured against your property.
Homeowner loan for debt consolidation
Homeowner loans are often taken out to help reorganize personal finances, allowing borrowers to consolidate existing debt into easy-to-manage monthly payments.
Although debt consolidation can be seen as a negative in managing outstanding balances – and often as a last resort – under the right circumstances, it can be a smart financial decision.
If your total credit balance is less than £20,000 it may be worth considering an unsecured debt consolidation loan or a credit card offering 0% on balance transfers rather than a secured loan, as these these do not risk your property in the event that you can. t respond to your refunds.
However, if you have debt balances over £20,000, chances are a secured loan is a suitable option for you. You can also borrow a lot more money than you can through a personal loan or credit card.
In addition to offering clients a fixed payment each month over an agreed period, a consolidation loan could reduce the amount of interest you pay each month by bringing all your existing debts down to a lower interest rate. It will also make it easier to track outstanding balances in one place.
Another welcome feature is that your credit score may increase. Applying for a consolidation loan for the first time can hurt your credit rating, but over time, reducing your credit card balances can have a positive impact on your credit rating because being close to credit limits could be considered “over-leveraged” by some lenders.
However, it is important to remember that you could extend the overall payment term, which could lead to an increase in the total interest paid over the period.
And, because the consolidation loan is secured by your home, it can be repossessed if you don’t meet mortgage or other secured debt payments.
Pepper Money Owner Loan
The average secured loan rate is 6.1% at Pepper Money, while unsecured loan rates vary depending on the amount you borrow. Those borrowing less than £3,000 can see rates starting at 5.9%, while loans over £5,000 get cheaper, starting at 3.7%.
But, for larger loans, in the range of £25,000 to £35,000, the maximum rate is 5.9% representing the APR taken out for four to five years, according to data from MoneySavingExpert.
At Pepper Money, you can borrow up to 100% of your property’s value — that’s the equity after taking into account your existing mortgage balance — which is especially beneficial given the surge in prices. real estate prices.
The minimum property value considered is £75,000 and homeowners can borrow between £5,000 and £1million. The repayment term offered is between three and 30 years, subject to individual circumstances and credit checks.
With a Pepper Money secured debt consolidation loan, we’ll take care of settling your existing loan, credit card, and store card balances when you’re done, so you don’t have to arrange this yourself. -same.
And don’t forget that you can overpay without being penalized if you want to clear your balance more quickly.
The first step is to get a clear picture of your existing borrowings and financial commitments. Check your current credit card, loan and overdraft balances, interest rates and monthly repayments. You can then calculate the total value of the consolidation loan you will need to cover these existing debts on your application.
But, before going ahead with debt consolidation, it is important to consider the total interest paid, as this may be higher than your current arrangement. See The Pepper Money Proprietary Loan Calculator to find out what your repayments might look like each month and how much you might end up paying if you apply.
To apply for a homeowner loan with Pepper Money, visit our home loan page or give us a call on 0808 239 1496. Our fully trained mortgage advisers will determine if a consolidation loan is the best choice for you, and they can guide you through the application process.
Our homeowner loans are also available through selected brokers.
The highlighted average initial rate is the median initial rate offered in quotes on products close to prime, prime and high LTV for broker-sourced and direct clients since our last price change on July 22 and until August 10.