Remortgage to Clear Debts

People in the UK now owe more money than ever before; we have rapidly become a society of debtors.

As it becomes easier and easier to borrow; whether it is through credit cards, loans or other personal finance products, people become lured deeper and deeper into debt, often to the point where they face an overwhelming financial burden.

Figures from the Consumer Credit Counseling Service reveal the extent of this problem - the number of individuals in ‘extreme’ debt (owing more than £100,000) rose from 1.4% to 2.7% in just one year from 2004 to 2005.

Additionally it is thought that an average individual in todays market spends 19 pence (£0.19) in the pound (£1.00) repaying back some form of debt (Secured and Unsecured). This is extremely daunting as back in 1990 just before the UK's most recent recession the average individual was repaying 18 pence (£0.18) in the pound (£1.00) on debts. So the question looms: Are we heading for another recession?

Debt problems are often compounded by a lack of understanding of the financial matters that control your final financial position. People often make poor decisions, that send debt levels soaring even further and eventually out of control. Many individuals; attempt to juggle their borrowing by taking on new loans or credit cards to repay others (Debt Consolidation), creating an even larger problem than previously experienced.

More and more people are finding themselves spiraling towards financial insolvency (IVA or Bankruptcy caused by out of control borrowing). Those who fail to admit that they have a debt problem are unfortunately destined for a very rough ride.

Ignoring payment notices and bills will obviously sweep the issue under the carpet for a short period of time, but in the long term it will make the situation far worse; interest mounts up, charges will get applied and the final debt will have increased significantly.

So if your one of those who has fallen behind in paying your bills, it’s important to confront the problem before it escalates. Take the first step and analyse your finances, work out your monthly income and expenditure to identify how much money you have left for debt repayment. Subsequently make a list of all your debtors, separating them into priority and non-priority debts.

Debt Management - Priority Debts

Debts that could lead to legal proceedings against you which could have serious consequences on your lifestyle and future credit rating. E.g., you could lose or be evicted from your home for mortgage or rent arrears, your electricity, gas or water supply could be cut off as a result of outstanding bills, you could face bankruptcy or imprisonment for non-payment of income tax, council tax or VAT, or you may have goods repossessed by bailiffs for unpaid child support or council tax bills.

Debt Management - Lower Priority Debts

Debts that are not secured against your home or any belongings and will not result in repossession of essential items. E.g., credit cards or store cards, catalogue accounts or bank overdrafts.

The next step is to contact your creditors to negotiate a repayment plan. It’s best to make some kind of regular payment and ensure that you make payments towards the priority debts first.

Alternatively you may not wish to use the remortgage capital for the repayment of some of the less serious debts; in such circumstances debt management companies can often be of great use.

Debt Management Companies

Debt Management companies will contact each of your various lenders on your behalf to organise a debt management plan which they will control.

If you would like to learn more about these plans simply visit our debt management information section, where you will find information:-

  • Debt Negotiation
  • Debt Counseling
  • Debt Management Solutions

Remortgages and Debt Management

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