We’re all familiar with the concept of the debt consolidation loan, but what about the debt consolidation mortgage? The debt consolidation mortgage is another term for an adverse credit mortgage, which may be used for this purpose. In fact, many of the people who take out a debt consolidation mortgage are remortgagers who are trying to get their finances in order. According to recent research from the Council of Mortgage Lenders (CML) up to 66 per cent of those who are looking for an adverse credit mortgage get a debt consolidation mortgage*.
According to the CML’s research, it works like this. People who already have a mortgage but who have financial problems look for an adverse credit remortgage so they can straighten out their personal finances. Perhaps there has been a problem with illness or job loss that has meant that arrears and defaults have crept on to their credit file. Perhaps recent rises in interest rates has meant that they are struggling financially and are unable to meet the payments on credit cards, loans and finance deals as they should. Whatever the reason, a debt consolidation mortgage may seem like the best way to fix finances and start again.
Debt Consolidation Loans
The CML estimates that many of the people who get a debt consolidation mortgage use the chance to use some of the equity in their home to repay existing debts. Rather than using an adverse credit mortgage simply for the purposes of home ownership, they use a debt consolidation mortgage as a first step to restoring their credit status. In the past year, the number of people taking out loans for this purpose has risen, and this may be because of the overall debt situation in the UK.
Research published in the last year has shown that the UK has one of the highest levels of credit card debt in Western Europe, as well as carrying consumer debt of around £1 trillion**. These staggering debt levels, combined with rising interest rates and house prices, have meant that more people struggle to repay their debts, making the debt consolidation mortgage an even more popular choice.
The debt consolidation mortgage is one option for credit repair and research suggests that up to 30 per cent of Brits with a debt consolidation mortgage thought it had helped their credit standing*. This contrasts with eight per cent of people who thought their financial situation had worsened since taking a debt consolidation mortgage, while the rest thought their situation had stayed static. The research suggests that a debt consolidation mortgage does work for credit repair – for some consumers at least.
In addition to getting advice on the right debt consolidation mortgage, it is essential to see this type of mortgage as part of an overall approach to managing debt. There are scores of debt charities and organisations providing debt management advice, who will help those who wish to ensure that their debts remain under control once they have taken out a debt consolidation mortgage.
* Source: Council of Mortgage Lenders – April 2007. ** Source: Bank of England – 29th July 2004