Debt Consolidation

Debt consolidation is a popular term in the mortgage market and what it involves is taking out one large loan to pay of other smaller ones, in the mortgage business this normally means tapping into the equity of your home in order to do so. The equity of your home becomes the security for the loan, and this means that you may get a lower interest rate however there are also inherent drawbacks to this.

If you take out a loan in the form of a mortgage and it is secured against your home then in essence you are putting your home on the line, if you were mortgage free and bought a car for €80,000 putting your home as security for a loan in order to get the car then if you could not pay you could potentially have to foreclose on your home. Typically you would sell the car but this is just to give an example of the risk.

Sometimes debt consolidation makes perfect sense, for instance if you have several loans (especially if they are at …

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