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 thatother parts of your like are suffering. You’ve got no spare cashfor the occasional night out or weekend away. Even making theminimum payments each month means that the outstanding amountsare never reducing.
The equity in your house.
If you have owned your house for several years there is a chancethat you have something called equity. This is the difference inthe current value of the house and the total amount of theoutstanding mortgage. So if you have an outstanding mortgage of£80,000 and your house is now valued at £170,000 you have gotequity of £90,000. There are certain companies that will lendyou money based on this equity. They are safe and secure in theknowledge that if you default on your payments that they can gettheir 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 creditcards and loans and have a reduced monthly payment. This methodof using the equity in your house is called
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 andprove that you can make the monthly payments.
Documentation.
Before you apply for a second mortgage with the intention ofpaying off your existing debts you should get all your paperworktogether. This will save you time and make the loan process muchquicker. Here is a list of the documentation that you will need.Different loan companies will ask for different things so justget 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 theprocess down if you don’t have them available.
You’ll also need full details of the credit cards, store cardsand loans that you want to pay off. This includes the name ofthe companies, the account numbers and the outstanding amounts.
The new company will actually issue with individual cheques thatyou send to these companies, you don’t actually get a cashpayment to yourself.
Caution
Let’s say that your loan application has now been processed, youhave paid off all those outstanding debts. The weight has beenlifted off your shoulders. You now need to be very careful. Ifyou run up any more debts at this point in your life then youwill be in deep trouble.
Make sure you cut up and return all but one of your creditcards. You need to keep one so that you can use it forpurchasing things on the internet and making hotel reservationsetc. Maintaining one credit card will ensure that you keep agood credit history. Do not apply for any new credit cards orloans.
Your monthly payments on the new loan will be significantlylower than the total of your previous credit card payments. But,you need to take advantage of this situation, it is no usespending the extra money on useless luxury goods. You have touse this opportunity to stabilise your financial life. I suggestthat you save at least half of the extra money that you now haveeach month. This will give you the chance to build up a bufferin case you suddenly find yourself unemployed.
If you need some help in deciding to be disciplined justconsider what your life will be like if your home isrepossessed.
The bad news
Although your monthly payments are now lower, the reason forthis is that you will be paying the loan off over a much longerperiod. This is how the loan companies make their money. Andbecause you are paying the loan off over a much longer periodyou will also be paying a lot more than the value of the actualloan. For this reason it is vitally important that you discussall possibilities with your Independent Financial Advisor.
Summary
Getting a debt consolidation loan can relive you of a lot ofstress and worry. But this comes with a long term financialpenalty. It is thus vitally important that you don’t run up anymore debt. Work at paying off that loan as quickly as possibleand regaining your financial freedom. For more informationvisit: www.ukmortgagewithbadcredit.com
Disclaimer: Please note, I am not a Financial Advisor and thisarticle is for informational purposes only. You MUST consultwith an Independent Financial Advisor before entering into anyfinancial agreements.
Article Source: www.ArticlesBase.com
