title:UK Credit Card and Debt Consolidation Loans author:John Grayson source_url:http://www.articlecity.com/articles/business_and_finance/article_3697.shtml date_saved:2007-07-25 12:30:07 category:business_and_finance article:

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.
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.
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.
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.
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.

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