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Debt Consolidation Loan Versus Remortgage

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If, like many people in the U.K. at present, you are not feeling as financially sound as you felt in the past, and are wanting to find a way to tighten the purse strings as it were, instead of having to cut down on the weekly food budget, that very much needed weekend break, etc. you should instead think of cutting down monthly without having to give up the little pleasures of life.Now could be the ideal time to consider debt consolidation.There are several routes to consider, and these depend on whether you are a homeowner or a non homeowner. The two main avenues open is a debt consolidation loan or a remortgage. If you do not own your own home a debt consolidation loan will not be an easy financial product to obtain. As a non homeowner, a remortgage is an impossibility, as a remortgage is a form of loan secured on a property. As a homeowner both are relatively easily obtained, especially if your credit rating is good. Whether a debt consolidation loan or a remortgage is better for you is partly personal choice, and depends on a number of circumstances.The difference between a debt consolidation loan and a remortgage is that with the secured loan, you keep your existing first mortgage in place and take out a separate loan to pay off all or some of your existing credit cards, personal loans, hire purchase, etc. Therefore when you add up your current outstanding balances on these debts and they total say £55,000, you would apply for a debt consolidation loan for this amount to clear them off.With a remortgage you would pay off your existing first mortgage, and borrow additional funds for your debt consolidation. Therefore if your current mortgage is £110,000, you would require a remortgage of £165,000 to pay off both your existing mortgage and your other debts.If you have a relatively small balance of debts of up to about £20,000, a consolidation loan could be the better way.If you only intend keeping the homeowner loan for a short time again the consolidation loan could be the better alternative as it will only be subject to a small early redemption charge.With a remortgage an eary redemption penalty could cost you thousands of pounds. If you have a penaltly in settling your current mortgage a consolidation would be the preferable option.However, if you are at present not tied into your current mortgage and it is not even at a good interest rate a complete remortgage would probably be better for you. There are some excellent interest rates at present, and some are fixed for years to come.

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