Simplify your finances with a homeowner loan
How to consolidate debts with a homeowner loan
If you’re struggling to manage multiple debts, a secured homeowner loan could help you get back on track. Find out how with our step-by-step guide.
How does debt consolidation work?
Debt consolidation is a method of merging your existing debts into one single affordable repayment. With less monthly repayments to think about, it could help save you time and money. In our guide, we explain everything you need to know about consolidating debts with a homeowner loan.
What is a debt consolidation loan?
A debt consolidation loan is an umbrella term for any loan used to pay off your debts. You could use a homeowner loan, a personal loan, or a bad credit loan; any of these could be considered a debt consolidation loan.
If you’re using a loan to cover your debts, you have a debt consolidation loan. It really is that simple.
Is debt consolidation worth it?
It’s easy to see why so many people choose debt consolidation. Rolling your debts into one repayment could make life that bit simpler. With just one lender and interest rate to think about, you can wave goodbye to managing multiple repayments every month.
Plus, you could free up your finances. Spreading the cost over a longer term can reduce your monthly repayments – or shifting your debts to a lower interest rate can be a cheaper way to clear them. Just remember, by extending the terms of the debt you may increase the total amount you repay.
Why use a homeowner loan to consolidate debt?
Unlike other loans, you’ll secure a homeowner loan against your property. When it comes to consolidating debt, homeowner loans have a few benefits:
Borrow more money
You can typically borrow high amounts with a homeowner loan – for example, you could borrow up to £50,000 with Evolution Money. If you have lots of outstanding debts, a homeowner loan could cover them all.
Spread the cost
Homeowner loans can have long repayment terms. Spreading your debts over a lengthier period could mean cheaper monthly payments.
Pay less interest
If you’re currently juggling high-interest repayments, you could save money by covering your debts with a homeowner loan. That’s because homeowner loan interest rates may be lower than those attached to credit cards and personal or payday loans.
Borrow with bad credit
Got a bad credit score? You could still consolidate your debts with a homeowner loan. The security of your home could help some lenders look past your credit history. Here at Evolution Money we look at more than just your credit score. We take all your personal circumstances into account to find a suitable loan for you.
How to consolidate debts with a homeowner loan
It’s easy to consolidate your debts with a homeowner loan. Here’s how:
Step 1: Check your eligibility
Before you apply for a homeowner loan, see if you fit the lenders criteria. Lots of loan applications could impact your credit score, so it’s important to check the lenders criteria before you apply.
Step 2: Does it make sense for you?
Whether you want to save money or make life simpler, make sure the loan is right for you. It’s worth seeing if you’ll save money once you’ve factored in the interest payment. If you don’t save in the long run, ask yourself if that’s worth the cheaper monthly payments in the short term.
Step 3: Prioritise your debts
If your homeowner loan doesn’t cover all of your debts, decide which ones take priority. Any high-interest or problematic debts should be included in your consolidation loan.
Step 4: Decide on a repayment term
Once you’ve settled on an amount that covers your debts, decide on your loan term. A shorter term can help you save on interest payments. A longer term could mean cheaper monthly repayments. Once you’ve got an idea of what your repayments could look like, find a loan term that makes sense for you.
Step 5: Pay off your debts
Once you’ve been approved for your secured loan, you should obtain settlement figures for each of your outstanding debts to pay them and close the accounts.
At Evolution Money, we pay your debts on your behalf leaving you with one affordable monthly repayment. However, you may need to contact the lender to close the account.
Step 6: Stick to your repayments
As you’re using a homeowner loan, you need to think carefully before securing your debts against your home. Your home could be at risk of repossession if you fall behind with your repayments. Using a Direct Debit will mean you’ll never forget a payment.
Things to think about...
While debt consolidation has lots of benefits, it’s important to make sure it’s the right option for you. Ask yourself these key questions before you start consolidating debt:
Are you saving money?
Even if your monthly repayments are cheaper, a longer term can mean you’re paying more interest in total. However, more affordable repayments could be a higher priority for you – regardless of the overall cost.
Before you apply, work out whether the cheaper repayments outweigh the total cost of the loan. And if they don’t, is it still worth it for you?
Does it make life easier?
Debt consolidation should ideally lower the amount of monthly repayments you make. Even if you’re not saving money in the long run, you might want to consolidate debt to streamline the number of monthly repayments. If that’s the case, ask yourself whether your new repayment plan is worth the overall cost.
If you’re still making other repayments outside of your debt consolidation loan, it may not be the right decision for you.
Can you afford your homeowner loan?
It’s essential you’re confident you can meet all of your repayments. A late repayment could damage your credit score – and repeated missed payments could put your home at risk of repossession. Take a good look at your new monthly repayments before you commit to a new loan.
At Evolution Money, we’ll carry out an affordability assessment to make sure we find the most suitable loan for your circumstances.
Think carefully before securing debts against your home your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured against it. If you are thinking of consolidating existing borrowing, you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
