Debt Consolidation – Homeowners Coping with the Crunch

A million people are at risk of house repossession in 2008 as the credit crunch tightens its squeeze – is debt consolidation the answer? To find out more visit http://www.ourdebtblog.com/

Debt consolidation can help people struggling to juggle debts that are increasingly escalating and harder to keep a hold on. It works by consolidating all your debts into one manageable monthly payment, so you know exactly where you stand with your finances. And for homeowners struggling with debt, debt consolidation could be crucial in 2008.

Debt consolidation – is it the way forward?

Homeowners are most at risk, as many homeowners over borrowed to get on the property ladder and are now feeling the impact of increased outgoings and higher utility bills. But the biggest financial risk that is putting, according to the Financial Services Authority, over a million homeowners at risk, is the fact those homeowners are coming to the end of their fixed rate deals. As a result, unless they are able to remortgage – difficult when lenders are tightening their lending criteria – they will be faced with big hikes in their mortgage monthly payments. It only takes a matter of months to fall into mortgage arrears, before the problem escalates into a very real threat of repossession. Debt consolidation could help some homeowners get a handle on spiralling financial problems.

Debt Consolidation – Taking control of your finances

Debt consolidation works by collating your debt into a single loan to pay off numerous outstanding loans; and with the help of a dedicated financial expert, you can secure a lower interest rate bringing your monthly outgoings down. Debt consolidation then could be a good option if you have spiralling credit card debts. Credit cards often have extremely high interest rates, making it harder to get on top of. If you have a home, you can use this as collateral to secure a lower interest debt consolidation loan. However, it’s worth remembering that any loans taken out using your home as collateral could put your property at risk if you don’t maintain the loan repayments.

Mortgages – Are you at risk?

If you took out a mortgage in recent years, chances are you bought when prices peaked, without reaping the benefits of increasing property prices. Many buyers were financially pushed to their limits to get on the property ladder and may have put down less than a 10% deposit, or borrowed more than 3.5 times their salary; it’s these homeowners that are most at risk to repossession as the credit crunch tightens – debt consolidation could be one way of helping to manage your finances.

Debt Consolidation A step-by-step guide

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Debt consolidation is basically a way of re-organising your debts into one affordable monthly payment. Debt consolidation loans are often taken out using your home as collateral; you should always think carefully before securing other debts against your home. As with any other secured loan, your home may be repossessed if you do not keep up with repayments. But debt consolidation can help those people who need to reduce their monthly outgoings.

What are the pros?

The pros of a debt consolidation loan include low interest rates, a low affordable monthly payment, the end of chasing letters or threats of legal action and the fact your credit rating is not impaired.

…And the cons?

Interest costs over the period of the loan will still be significant. You will also have to stick to a debt management plan and keep within a budget to ensure you stop overspending on credit cards etc.

Who should consolidate?

Debt consolidation loans should only be taken out if you know you can meet the repayments. They are suitable for anybody who feels their debts are becoming too complicated to handle. It’s easy to let credit cards, store cards and loans dominate your outgoings. Debt consolidation loans are suitable for those who want to reduce their monthly payments. It’s also suitable for those who don’t feel organised with their finances, and are not confident they’ll be able to stay afloat if they don’t take action.

Why choose debt consolidation?

Debt consolidation is more expensive in the long term, but can be highly effective in the short term. It works by spreading your new debt consolidation loan over a longer period. You could save over 50% on your current monthly repayments, although your new loan’s overall interest payments will increase over the long term.

How much should I borrow?

You should only borrow the minimum – the more you borrow, the more it will cost in the long term. A big loan over a long period will charge a significant amount of interest. But in return for this long term loan, you will receive a significant lower interest rate, for example 8.9%, which is usually half that of a credit card, e.g. 17.9%.

Is debt consolidation suitable?

An unsecured loan is suitable if you don’t have a home to secure your debt to, but do have multiple high interest debts which are creating cripplingly high monthly repayments.

Debt Consolidation A Matter of Life and Debt

As repossessions continue to increase, debt consolidation can help those homeowners struggling with mortgage problems. Many businesses opt for company voluntary arrangements in order to ease their debt problems.

The saying goes that a man’s home is his castle. Losing your home can be devastating – impacting on your identity, status and that all-important sense of safety, routine and continuation that your children need. Without effective debt consolidation solutions, mortgage arrears can swiftly turn into unstoppable repossession orders. Losing your home can impact on your future outcomes – you are more likely to slide into poverty if you don’t take crucial debt management and debt consolidation steps.

Debt consolidation – stop repossession

The huge rise in repossession risks has led some charities to approach mortgage lenders in a hope to help homeowners in debt. Shelter has asked for a new system to help homeowners in arrears to try and stop repossessions – which have reached their highest levels in the UK for eight years. As it stands however, debt consolidation and urgent debt management plans are necessary to stop the rigorous approach lenders currently take to those struggling with debt.

Dealing with debt – the increased repossession risk

House repossessions rose by 21% last year and the Council of Mortgage Lenders predict this figure will rise. Shelter believes many lenders are not encouraging those in debt to explore other avenues to avoid repossession. Debt consolidation and debt management strategies could help some homeowners dicing with debt. The situation is expected to be exacerbated as more homeowners come to the end of their fixed rate mortgage deals this year. For some, that could equate to another hundred pounds or so a month on top of their outgoings – unthinkable for those juggling debt. Debt consolidation is one way of taking control of your finances, ensuring you don’t have to lose your home.

Face up to debt stress with debt consolidation help

Debt can cause huge stress and anxiety. Many people who need debt consolidation solutions are not in debt because of a champagne lifestyle or extravagant spending but because of poor fortune such as illness, redundancy, divorce or bereavement. Debt consolidation offers one way of helping homeowners stay afloat at particularly vulnerable times. There is a stigma associated with debt, but as debt affects the majority of UK citizens, it’s crucial you don’t ignore it, put your head in the sand and take no action – debt consolidation or a debt management strategy from experienced financial advisors can help. Do something – today.