UK Credit Card and Debt Consolidation Loans

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

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



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.