What exactly is debt consolidation?
Debt consolidation in the context that we use it refers to borrowing money against the equity in your property to pay off some other debts.
It’s not something that should be done lightly because you are just replacing one debt with another but sometimes it is the most appropriate decision especially if you have made some mistakes financially or something has gone wrong in your life and you are going backwards because of the interest that you are being hit with each month.
The logic behind debt consolidation is simple.
Instead of paying off a debt with a high interest rate – a credit card being a good example where the interest rate might be 22% – this can be added into a home loan where the interest rate could be around 6%.
The advantages are obvious but there are some serious issues that do need to be addressed.
· If the debt is just absorbed into a home loan, then the end result is that the credit card debt will end up being paid over the life of the loan;
· Has whatever caused this debt to be accrued in the first place been addressed? Debt consolidation is not an answer if the issues that caused the problem in the first place have not been addressed?
If you need help, then please contact me but please do it before you start falling behind. It is much easier to help someone who is having trouble but has kept repayments up to date but finds it a struggle than it is to try and help someone who has left it too long and is behind in repayments.