Remortgage to consolidate debts is smart for people with good financial habits. It is worth mentioning that this strategy has its own risks that should not be ignored:
• A new loan usually has added costs and it is important to understand what it involves before you sign any contracts.
• It might increase your interest rate; if you have a bad credit score and you do not qualify for low rates you will end up with a rate that is higher than what you currently owe.
• You pay more interest over time- a debt consolidation loan may last for many years and this means that you will have to pay interest over the life of the loan.
• You risk making payments- if you miss payments on a debt consolidation remortgage, this will impact your credit score significantly. It is important to make sure you can cover the new payment without any difficulty.
• Does not help you deal with underlying financial issues- this means that you might find yourselves in a deeper debt because you do not know how to stop overspending.
• It may encourage increased spending