Secured and unsecured borrowing.

Money Saving Tips

4. Split your borrowing into secured and unsecured categories and review it. Being a homeowner, you may find yourself in a far better position to borrow than you thought, especially if you have substantial unsecured debt. If your outgoings are higher than is ideal, you may wish to consider releasing equity from your property (if there is any), and using the proceeds to pay of various unsecured loans and credit cards, (or to pay for any other expenses due to be incurred in the coming year).

There are both pros and cons to doing this however. The main advantages are that you will undoubtedly reduce your monthly outgoings, tidy up your finances by reducing the number of creditors you have, and also secure cheaper rates, as your interest rate will tend to be lower due to your debt being secured by your property. If this is a priority for you then, it can be arranged, simply by contacting your existing lender, or even approaching a new lender altogether. However, before doing this you should consider the disadvantages.

Firstly, releasing equity on your property may vastly reduce the profit you may receive from any imminent sale you may have planned, meaning less to put down as deposit on a new place should you wish to move. This in turn can cut down on your options on properties available to you. Also, again you may find that the increased terms often related to Equity Release Loans will lead to a larger total amount payable to the lender.

This can be overcome if you have a flexible mortgage allowing overpayments, meaning that you can secure your borrowing at mortgage rates, and continue to pay at a monthly amount that suits you. In the end, when considering these options, you must weigh up the pros and cons, then apply them to your own situation, to see whether this is a valid option for you.

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Borrowing - Secured & Unsecured