Loan or use equity?? Help!

TuckertheCat

Hi All

I bet that this has been answered before and I apologize if this is the wrong forum but I can't seem to find any relevent posts (unless I'm looking in the wrong place of course).

We've just bought a new bike for about 14k, I also have a few grand of CC debts plus a loan. My loan payment is just about affordable but leaves very little to live on (basically a Loyds mis-sold loan but thats' another story), hence I'd love to drop my payments down to something more reaonable and maybe even pay of the bike/cc debts etc.

Question is do we get a secured loan on the houser or maybe extend the mortgage? We have a fair bit of equity available, ample to pay of the debts but wer'e still not sure which is the best method taking into account payment amount and period over which we would have to pay off the loan.

Help please!

Rafter

Tucker,

There are two issues here.

1. If you extend the mortgage and something awful happens to you (injury, lose job etc) your house can be reposessed. At the moment your debts (apart from mortgage) are unsecured so they cannot make you sell your house.

2. Reducing payments by cutting your interest rate (Mortgages are usually cheaper than other debt) is great. Reducing your payments by spreading debt over a longer period is very bad news: You could still be paying for your new bike, last years clothes or even a night out or holiday in 25 years time.

Best thing to do is to schedule out your debts and the interest your paying on them, tell us how good your credit rating is and how much you are earning and whether you are self employed etc.

Someone can then advise you about your options but ideally you want to be paying off your debt at the same or a faster rate, but just paying less in interest - that is a win/win for you. Paying less off means you are just mortgaging your future standard of living, extending the day when you will be debt free or can afford to retire which is not a great plan - unless you don't want to retire and want to enjoy life now and not worry about the future!

Good luck.

R.