Debt consolidation

budgetbrian

I have come across a real conundrum. 

I have several credit cards that are zero interest amounts that mature soon and I wish to clear them by taking out a mortgage on an unencumbered property I own. 

I discovered to my amazement that although I’m only borrowing a fraction of the value of the property for the purpose of debt consolidation the loan is refused on the basis I have too much unsecured debt-the very debt I intend to clear with the remortgage. I’m getting nowhere and fear I will end up paying huge credit card interest until I clear the balance as I’m unable to borrow against the property with a zero debt on it !

fatbelly

You won't be clearing the debt by securing it on your property. Just moving it to a worse place

This lender is behaving responsibly in not agreeing to your plan.

Are you able to meet the minimum payments on the cards?

Have you explored further 0% balance transfer deals?

CliveOfIndia

This is a very common question.

Firstly, converting unsecured debt to secured is a bad idea.  Even though you don't live in the property, you face having the property repossessed if you default on payments.

But the main issue is simply down to affordability.  Since a lender cannot guarantee that you'll use the new credit to repay your existing debt, they have to assume that the loan would be in addition to - not instead of - your existing debt.

Of course, you would in all likelihood use the new loan to clear your debt.  But there's nothing to stop you from visiting the nearest Ferrari dealership or booking a world cruise with it.  That's the stance any reputable lender would take.

Emmia

budgetbrian said:

I have come across a real conundrum. 

I have several credit cards that are zero interest amounts that mature soon and I wish to clear them by taking out a mortgage on an unencumbered property I own. 

I discovered to my amazement that although I’m only borrowing a fraction of the value of the property for the purpose of debt consolidation the loan is refused on the basis I have too much unsecured debt-the very debt I intend to clear with the remortgage. I’m getting nowhere and fear I will end up paying huge credit card interest until I clear the balance as I’m unable to borrow against the property with a zero debt on it !

Your other option is selling the property and settling your debts that way.

Whether that's a good financial decision is a different question.