Dealing With Debts, Options Explained

b) Consolidation Loan / Re-finance / Mortgage

Apply to a lender to clear your debts.

A consolidation loan basically means that all (or the majority) of your debts are replaced by a single 'affordable' loan resulting in overall lower monthly payments.

A consolidation loan will only really help if:

it is used to pay some or all of the existing debt
the new payments are lower than those (combined) that are being paid towards the existing debts
the new payments are 'affordable'

If the above does not apply then it is likely that a loan may make the problem worse

Some pros

one affordable monthly payment
the monthly payments(s) should be lower overall

Some cons

there may be fees involved in setting up the loan
the lender might insist that the loan be secured on your property which may lead to the home being put at SERIOUS RISK if payments are not maintained
the size of the overall debt may increase significantly
if all the existing debts are not cleared with the new loan then it is possible that the situation could be made worse and / or make it still difficult to service all payments
a poor credit rating may make it difficult to obtain a loan / refinance or result in adverse terms / conditions / interest rates being offered

If you feel that refinancing would be a suitable solution for dealing with your debts then it is strongly advisable to seek independent advice and obtain / compare at least three separate quotes from reputable lenders, carefully checking the terms / conditions / fees / charges / interest rates etc before making any decisions.

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