A debt consolidation loan is only suitable for lower levels of debt or when there is an asset to secure the debt against, as in a mortgage.
Overall Cost To You
With a debt consolidation loan, while monthly payments and interest decrease, you can pay back more than you originally owed over the longer term of the loan.
Typically, people completing an IVA (Individual Voluntary Arrangement) get some debt written off; the amount depends on personal circumstances.
Risk To Your Home In An IVA
With a secured loan or remortgage, you are decreasing how much of your home you own and therefore increasing the risk repossession, should you fail to make repayments.
In an IVA, you are not putting your home at higher risk of repossession. in fact, the IVA is protecting as you are allowed to budget for mortgage payments before addressing your unsecured debts.
6 Reasons to consider an IVA over a Debt Consolidation Loan
Your Overall Cost
With an IVA you repay part of your debts to clear them in full. With a consolidation loan your total costs will be more than you owe now.
This alone could save you £1000’s over repaying a loan for 5-10 years.
Protection From Creditors
Those you owe are not allowed by law to pursue payment for any debts included in your IVA.
Being declined for a loan is recorded on your credit report. Entering into an IVA is also – but making a enqury here to discuss an IVA is not.
Your IVA payments are based on what you can afford – not the size of your debts.
Don’t Secure – Unsecured Debt?
If you make unsecured, secured with a homeowner a loan then there is at risk of repossession if your fail to maintain payments.
Using a consolidation to repay all other debts in full does not impair your credit rating; an IVA harms your credit rating for six years.