Five Very Excelent Reasons To Use A Remortgage To Clear Unsecured Debts And Loans

In the past decade, one of the fundamental economic problems facing the British economy has been the growth in unsecured debt. In February this year Britain passed an alarming financial milestone, Credit Action reports that total UK personal debt was £1,454 billion. Individuals are currently indebted to a greater extent than in any other time in our history; we owe more than Britain's GDP for 2010. Much of this is credit card borrowing, and at high interest rates. British consumers pay £182 million in personal interest every single day.

One of the ways that many Brits deal with their unsecured borrowings is to consolidate them with a remortgage. You can move your mortgage from one bank or building society to another and borrow additional cash at the same time to repay other loans or credit cards. Our guide looks at the top five reasons why you may want to consider consolidating your debts with a remortgage.

Lower interest rate: Many people remortgage simply to benefit from a lower interest rate on their mortgage. However, borrowing extra money to repay your unsecured debts also means that you can reduce the interest rate you are being charged on your other debt. And, you can typically also benefit from fixing your payments for a period or take advantage of the flexibility of a tracker or discounted mortgage rate.

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: If you have taken out a personal loan, it tends generally have a life of about 5-7 years. Credit cards, if used properly, are designed purely for short term borrowing, which is why they are so expensive if they are not repaid. When you remortgage a property to cover unsecured debt, you will most likely benefit from repaying the loan over a longer period. However, whilst this might help spread the repayments over the long term, it may end up costing you more in interest in total life of the mortgage.

Save time by dealing with one creditor: If you have several credit cards with balances or one or more personal loans it means that you are likely to have a number of different financial services companies to deal with. So, dealing with all of them - for example to change your bank details or address - can be time consuming.

If you consolidate unsecured debts using a remortgage, you end up with just one creditor, the mortgage lender you have your property with. Your debt repayments simply come out with your mortgage every month. This makes your monthly finances vastly more simplified to manage and it also means that you don't have to lose valuable time chasing up several creditors.

One direct debit: As mentioned, the debts can be repaid on your payday as part of your mortgage. Instead of paying several direct debits to several companies (for personal loans store cards, HP on a car or for the monthly minimum instalment on your credit card), by consolidating debts through a remortgage, it means that you will be liable for just one payment going out of your bank account every month.

Lower repayments: Repaying your credit cards and personal loans with the proceeds of a remortgage can also help you to reduce your total monthly outgoings. As you are likely to be paying a lower interest rate and, often, over a longer loan term, you will find that less is coming out of your bank every month.

There are lots of advantages of remortgaging to pay off your credit cards and loans. As well as simplifying your finances, a remortgage can help you save money and to reduce your monthly expenditure. Always bear in mind however that if you don't pay your unsecured loans, your home is safe. Consolidating them with a remortgage means that any failure to keep up your repayments will put your property at risk.