lot of the time, this option is chosen because the interest rates are much lower than on unsecured, shorter-term debt, and the payments become more manageable.
Unsecured debt almost always carried a higher interest rate because the lender doesn't have the security of a property to lower their risk exposure.
The type of debts that are usually cheaper to consolidate through a mortgage include things like:
- Personal or payday loans
- Credit card or store card debt
- Bank overdrafts
As an example, let's say you have a current debt of:
- Credit Card A £5,000 balance charged at 24.5% interest
- Loan A £10,000 balance charged at 11.5% APR
- Loan B £7,500 balance charged at 16.95% APR
In total, your debt comes to £22,500, and over the next ten years, you will pay interest of £23,423 (if not repaid sooner) - making the repayment of £22,500 debt an enormous £45,923.
If you decided to take out a ten-year debt consolidation mortgage to repay the £22,500 at an interest rate of 5%, you would repay the debt in the same amount of time, with total repayments slashed from £45,923 to £28,638 - reducing the interest by over £17,000.
Before taking out lending secured against your home, you are invited to contact Revolution Finance on 0330 304 3040, so we can discuss the best mortgage options for you.