Five Clear Reasons To Use A Remortgage To Wipe Your Unsecured Debt Out

The amount of unsecured debt in the UK has increased substantially over recent years. According to the charity Credit Action, Brits owed a total of GBP 1.454 billion in February 2011 on which we pay GBP 182 million in interest every day. And, as unsecured loans are riskier than secured loans (as the lender doesn't have any security for the loan) interest rates tend to be higher.

Remortgaging your home to raise money to repay your unsecured debts can have several advantages. You can switch your mortgage to another lender without moving home whilst simultaneously using any equity in your property to raise cash to pay off your credit cards or personal loans. Here are our top five reasons to clear your unsecured debts with a remortgage.

You Can Obtain a Lower Rate of Interest: Many people remortgage to take advantage of a lower rate of interest. This also applies to unsecured debts, as when you add them onto the mortgage the interest rate will often be lower. For example, a credit card may be on 20% or more, but when the funds are put onto the mortgage, this can be reduced to 5% or 6 %.

Remortgage rates are generally much lower than rates on other types of borrowing. For example, the financial data analysts Moneyfacts recently found that the average credit card interest rate in the UK in was 18.9 per cent whilst remortgages are often available at around 5 per cent. By raising cash on a remortgage you can repay debts at higher rates of interest.

Spread payments over a longer period: One of the advantages of a remortgage is that you can generally take the loan over a longer period of time. Many mortgages are taken over a term of between 15 and 25 years. This is compared to a credit card which is designed for very short term borrowing or a personal loan which is generally taken out over 5-7 years.

Using Only One Creditor: Having several credit accounts with various creditors can be time consuming when dealing with the administration and repayments. So securing your debts against your home has the advantage of only dealing with one single creditor.

With a remortgage, you can simplify your finances and save yourself time. By borrowing additional funds to repay your unsecured debts you will be left with just one loan and just one lender. Instead of having to deal with multiple companies you will just have to correspond with your mortgage lender which is much simpler and more straightforward.

One direct debit: Managing a number of unsecured debts can be tricky. You have to remember to make a minimum payment to each of your credit cards every month as well as ensuring you have the funds to make payments to personal loans. However, with a remortgage you will have just one monthly payment and one direct debit to worry about.

Lower Monthly Repayments: Due to the lower rate of interest, and extended repayment term, your monthly outgoings will generally be lower, meaning you can manage your finances better and keep on top of your budget.

Many people choose to remortgage in order to ensure that their total monthly outgoings on their debts are more manageable and more affordable. Securing your credit card or personal loan debts does mean that your home is at risk if you fail to keep up your repayments, and so it is vital that your repayments are affordable when you sign up for your remortgage.