Other Credit Options

Other credit options

Secured loans represent a medium to long term credit solution for someone looking to raise money, either to reschedule their existing debt, or to afford home improvements or fund a substantial purchase.  Payments may be spread over a term to suit your circumstances and interest rates are generally competitive.  Other loan or finance solutions include unsecured loans, bridging loans, credit cards and re-mortgages.

Unsecured loans are normally for smaller amounts and are often available up to a maximum of £25,000.  Normally they must be repaid over a shorter term, making the repayments higher and /or prohibitive.  If you have suffered from a poor credit rating, have County Court Judgments or defaults, it may be very difficult to obtain an unsecured loan as the lender will fear that you may not make or keep up with the repayments.

Bridging loans are ideal for raising money over a short period of time when repayment can be made in full after a few months or so.  Typically they may bridge the gap between needing the money for renovation when a traditional mortgage lender would not be able to help as the property value is insufficient until the renovations are actually complete.

Credit cards make useful short term credit solutions for smaller purchases where the payments need only be spread over a short period or when the full balance may be cleared within a month or so.  Whilst very useful, credit cards can be easy to obtain and can quickly mount up at higher rates of interest if the outstanding balance is not cleared in full each month.

Re-mortgages are another hugely useful and valid credit solution if you want to reduce your monthly outgoings and wish to refinance over a longer term.  Re-mortgages tend to take a little longer to complete than a secured loan and they can often restrict the use that any money lent is used for.  Independent re-mortgage advice should always be sought to consider this option in case it would be the most appropriate for you.

However, if it hasn't been very long since you obtained your original mortgage or you got it at a very discounted rate you may face substantial penalties for early repayment. Or, if the balance on your existing loan is very small you may find that lenders are unwilling to underwrite a re-mortgage or that the fees they charge will be greater than the overall savings you would otherwise achieve.  Other circumstantial changes, such as recently turning self employed, or starting a family may affect the availability of a re-mortgage and consideration of all your circumstances should be made.

Debt consolidation loans, whether secured or unsecured are an increasingly common option for people in a variety of financial situations. Before you decide if it’s right for you, carefully evaluate the advantages and disadvantages of such a loan and take advantage of the plentiful information resources available to assist your decision-making process.