Understanding The Risks and Rewards of Debt Consolidation

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Debt consolidation (adding loans, credit card balances or other debts to your mortgage) is a term that’s increasingly cropping up in recent mortgage discussions, particularly in the current economic climate with the cost of living and higher interest rates. This article aims to shed light on what debt consolidation is, how it works, and why it should be considered as a last resort. If you’re contemplating consolidating your debts, this read is tailored for you.

Understanding Debt Consolidation

Debt consolidation involves combining multiple debts – such as loans, credit card balances, or other financial liabilities – into a single, manageable mortgage payment. When you receive the additional monies, it is critical that you pay off your debts as this is what you are committed to, and the lender is expecting it. While this approach has its merits, it also comes with its own set of drawbacks.

Simplified Payments

One of the most immediate benefits of debt consolidation is the simplification of your financial obligations. Instead of juggling multiple payments with varying interest rates, you’ll make a single mortgage payment each month.

Risk of Higher Overall Costs

A lower monthly payment may sound good, but it could likely mean you’ll be paying back the loan for a longer time, and as such the overall interest you will be paying will be significantly higher, especially over a long term.

When to Consider Debt Consolidation

If you’re dealing with multiple payments or high interest rates on your debts or borrowing, you might think about debt consolidation. But it’s important to know when you really need it, for example when your debts become too hard to handle or you find it tough to pay your bills each month.

Case Study

Our clients, Mr and Mrs C, were keen to remortgage their property and consolidate their existing debts into one loan. They knew their interest rate was going to go up, despite this, they chose to roll their loan and credit card debts into their mortgage, increasing their overall monthly mortgage payment by £400. This made managing their overall debts much easier.

They opted for debt consolidation for several reasons –

  • High Interest Rates – They knew the interest rate on their existing mortgage was going to increase, making the cost of servicing it a lot higher than before. With their additional loan and credit card debt on top, the additional financial pressure was a key factor in their decision. As a result of this, they wanted to combine their payments to make it more manageable for them to pay.
  • Difficulty In Managing Multiple Debts – Juggling different payment deadlines and varying interest rates had become stressful and complicated task for Mr and Mrs C, making their financial life harder. They also struggled with budgeting which added to the difficulty in managing their multiple debts.
  • Reduced Monthly Payment – By combining their debts with their mortgage Mr and Mrs C were able to reduce their monthly outgoings despite the increase in their mortgage payments. This has made it a little easier to save each month.

Why Debt Consolidation Should Be a Last Resort

While our clients, Mr and Mrs C, found debt consolidation to be the right choice for their situation, it’s important to understand that this option is typically best kept as a last resort. Here’s why –

  • Long Term Financial Impact – By consolidating your debts, you might be extending the time it takes to pay off your loans. This means you could end up paying more in interest over the long term, even if your monthly payments seem more manageable.
  • Securing Debts Against Your Home – Often, debt consolidation involves securing unsecured debts against your home. This increases the risk, as failing to keep up with payments could potentially put your home at risk.
  • Potential For A False Sense Of Security – Lower monthly payments might give you the impression that you’re just spreading the debt over a longer period. It’s crucial to consider the total cost over time, not just the immediate relief.

We Can Help

At The Mortgage Stop, we offer a free, no obligation initial consultation to help you make an informed decision about debt consolidation. Our team provides personalised and expert advice to guide you through this complex financial decision.


Debt consolidation is a complex financial decision that should not be taken lightly. If you you’re considering this route, it’s important to weigh the pros and cons carefully. For expert guidance, don’t hesitate to reach out for a free initial consultation with us.

Your home may be repossessed if you do not keep up repayments on your mortgage. Think carefully before securing other debts against your home. You may have to pay an early repayment charge to your existing lender if you remortgage.

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