Homeowners are finding that a remortgage is a great way to handle debt consolidation. Debt consolidation takes place when a homeowner takes out a single new mortgage loan to pay off several existing debts. It is a great way of taking control of finances, but a homeowner must be careful. This type of loan might not be the best step to make.

 

Before going through with a remortgage for debt consolidation, a homeowner must take a look at all the alternatives available. As most debtors are eager to work with clients, it would be easy to check to see if it would be possible to make new payment arrangements instead of getting a remortgage loan. Also borrowing money from relatives to get through some tough spots is possible.

However, a remortgage still stands as one of the most common ways a family can handle debt consolidation.

There are several pros to consolidating debt. Some advantages include:

1.  Lowering the interest rate

2.  Lowering the monthly payments

3.  Knowing exactly when the debt will be paid off

4.  Making only 1 single monthly payment

5.  Only having to deal with 1 lender

At the same time there are pros, one must consider the possible cons to consolidation. Here are a few possibilities:

1.  If the lender places a lien against your home to secure the loan, your property will be at risk if you fall behind on payments

2.  You could end up paying a higher final total and paying for a longer period of time

3.  You will have administrative costs to setting up and repaying the new loan

4.  If your credit is in bad shape, your choices may be limited to a loan with a high interest rate or a loan secured against your home

5.  The last decision to make when possibly securing a consolidation loan is choosing who to go with.

Make sure to watch a few things:

1.  How long will you be making repayments and what the total figure will be

2.  What is the interest rate and can it change

3.  Are there penalties for missing a payment and what are they

4.  Penalty for paying it off early

Homeowners should check and re-check all the fine print and get counsel from multiple sources right before proceeding. Once a remortgage has been processed, a homeowner should keep tight control of their finances and possibly seek out financial advising.