Loan Consolidation

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AABM Fan

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A friend (I swear it's not me!!) has asked me about loan consolidation. He has a series of loans from his business e.g. loan for a van, credit card etc. of approx 50k when added individually. He is looking to consolidate all loans into one. Would anyone know the best way of going about this? Who is offering the best rate for this type of consolidation at the moment?
Thanks,
AABM
 
AABM Fan said:
A friend (I swear it's not me!!) has asked me about loan consolidation. He has a series of loans from his business e.g. loan for a van, credit card etc. of approx 50k when added individually. He is looking to consolidate all loans into one. Would anyone know the best way of going about this? Who is offering the best rate for this type of consolidation at the moment?
Thanks,
AABM
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While running the risk of a number of "it's better to tell the truth" type replies from AAM modulators, I personally would never tell the bank that this is what you are doing as they may consider you a poor risk and give you (or rather your friend) a bad rate.

Tell them it's a home improvement or car loan.

BTW, is AABM a competitor to AAM?
Ask About Borrowing Money, perhaps? :p
 
Honestly - it's not for me!! Does it matter/would it help if it is pointed out that it's a business loan?

(AABM was a typo on my part - Ask ABout Money Fan :) !!)
 
MonsieurBond said:
While running the risk of a number of "it's better to tell the truth" type replies from AAM modulators, I personally would never tell the bank that this is what you are doing as they may consider you a poor risk and give you (or rather your friend) a bad rate.

Tell them it's a home improvement or car loan.

BTW, is AABM a competitor to AAM?
Ask About Borrowing Money, perhaps? :p
Click to expand...

I have seen numerous remortgage ads for debt consolidation purposes. The bottom line is if he can afford to repay and has security ( I'd imagine it would be necessary in this case ) there are banks who will do business with him.
 
Two things to keep in mind when consolidating existing debts onto a mortgage loan:
  • Better to schedule the repayment of the top-up over a similar term to the original loans rather than over the full term of the mortgage as doing the latter will most likely result in it costing a lot more in the long run even if the monthly repayments are less.
  • Best to see this sort of loan consolidation as a once off solution to sort out finances that have grown out of control and not as an opportunity to rack up more debt in the future. If the underlying problem that resulted in such debts is indicipline with spending then it's important to deal with these issues (e.g. cut up the credit cards) to prevent the debt accumulating again.
 
Is it possible to consolidate debt if you are not a homeowner??
 
What do you mean? Consolidation usually means topping up a mortgage and using the top-up to clear other higher cost debts thus replacing one or more higher rate loans with a lower rate mortgage top-up. If managed correctly (e.g. scheduling the top-up over the same sort of timeframe as the original loans - years instead of decades) then it can mean lower monthly repayments and lower total interest costs in the medium/longer term. If the top-up is spread over the remaining lifetime of the loan then it could be more expensive because you will be paying for that car/kitchen/holiday/etc. over decades rather than years and while the monthly repayments and rate may be lower than the original loans, paying interest over decades could cost more in the long run. Where somebody does not have a mortgage/home then they can still look at consolidating one or more high interest loans and replacing them with a single lower cost loan. However the options are more restricted because unsecured credit usually costs a lot more than mortgage credit. Don't forget that any loan consolidation especially mortgage top-ups should generally be a once off strategy to deal with serious debt and not treated as breathing space to rack up even more debt without rectifying the underlying spending/budgeting issues that lead to the situation in the first place.
 
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