Debt Consolidation Loan Facts

debt consolidation loans
by infomatique

Debt Consolidation Loan Facts

We are suffering the most dreadful economic climate in living memory. The writer of this article has been involved in the finance industry for twenty five years now, and has never seen the industry in the state that it is in at present. Lending and borrowing is an essential of a healthy economy, and if sensible lending practices are in place the economy can grow once more. There is simply not enough people wanting to borrow at present, and this is mainly due to the fact that most people really do not seem to realize that there are funds available.

People are struggling to pay their credit cards, personal loans and hire purchase simply because they do not know that there are lenders in the market who would be only too glad to help these individuals by granting a debt consolidation loan.

We constantly have newscasters on television stating that there are no funds available for borrowers, and in fact this is not the case. It is certainly true that some lenders have completely withdrawn from the market, or only have funds available to grant further advances to their existing customers, and are not accepting any new borrowers.

It is also a correct fact that criteria has tightened up, and that many loan products which were available before the credit crunch no longer exist. It was in fact mainly due to the very lax underwriting of these products that the economic crisis occurred. These were such things as the 100% LTV plan which meant you could borrow up to 100% of the value of your property.When property prices fell this had disastrous consequences for the lender if the borrower defaulted.

A very risky lending practice was the 125% equity plan.

This meant that if you had a house worth £200,000 , 25% of that amount, namely £50,000 could be added to the value, and therefore if you had a mortgage of £190,000, in theory you could borrow up to £60,000. This form of loan seems foolhardy at the best of times, but a disaster waiting to happen if property prices fell which they in fact have.

However in spite of the withdrawal of many products there are still debt consolidation loans for homeowners readily available. The starting interest rates at present for a debt consolidation loan for a homeowner is about 8% APR which compared to your credit card rates of 20% or even much higher affords an enormous saving. If you have a number of debts, a debt consolidation can half your monthly outgoings.

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