The TUC recently released a report entitled “Britain in the Red” which highlighted that 1.6m UK households are living today with “extreme debt”. The report criticizes official figures which they say underestimate the intense burden of repayments for individuals and families, especially as wages have fallen, leaving households finding it harder than ever to keep on top of repayments.

With today’s easy access to unsecured credit, via credit cards, overdrafts, personal loans etc., I am sure you often come across clients with multiple debts, and a host of separate monthly payments. High repayments, interest charges and fees can add to the burden, causing household budgets to be stretched – if payments become too great a burden, with one or two missed payment dates, your clients financial wellbeing can take a tumble incredibly quickly.

As a mortgage advisor, your clients may not consider debt consolidation as being something that you can help with. But for clients with equity in their home, consolidating their debts during a re-mortgage can considerably reduce the pace at which interest would otherwise be accumulating, as well as reducing the number of debts where repayments can be dispersed and hard to manage.

However, for many clients with even relatively small debts, it can be difficult to arrange a first mortgage product as a result of strict affordability criteria and policy rules. However, Second Mortgage lenders often take a more measured view of these applicants – basing their affordability calculations on the position post consolidation, rather than before – allowing customers to reap the benefits of lower payments and save £100’s or more each month.

Offering second mortgage products for debt consolidation purposes can give far greater flexibility to your product portfolio and help better meet the needs of clients with potentially unaffordable debt.

Here’s a recent example of where we were able to make a considerable difference to a client’s financial stability by consolidating her debt with a second mortgage and reducing her monthly outgoings.

The Customer

Mrs A is 50yrs old and self-employed, with an income of £60k.

The Situation

The customer had large credit card debts she needed to consolidate. Despite having previously utilised interest free options, the high interest meant she was committed to large monthly repayments just to keep ahead of the monthly interest.

The customer needed to raise £40k to consolidate her debt into one manageable and affordable monthly payment.

Her current repayment commitments were taking their toll on her budget and she had just missed one of her credit card payments.

The Solution

After completing a full fact find and making sure we fully understood the customer’s financial situation and needs, we were able to find a lender who was willing to help subject to valuation.

Our regional branch structure allows our teams to maintain a depth of local property knowledge. Based on this expertise the team were confident that a professional valuation would support the customers estimated value.

Loan.co.uk paid for the valuation on Mrs A’s behalf and when it came in, we were able to secure the customer the best possible rate. And, to avoid any future interest rate rises, a competitively priced fixed rate was selected by the customer.

The loan was quickly funded, and the cards were repaid before the situation got any worse – saving the customer £629 each and every month. And, the debt is reducing each and every month, meaning that the customer will be debt free by her ideal retirement date.

The introducer was happy, having helped a customer who otherwise would have been lost – and, once the customer had their finances firmly back on track, would be able to arrange a re-mortgage on a competitive, high street rate, reducing the customer’s outgoings even further

What the customer said:

“The service I got was delivered in the highest professional standard anyone can ever get from any organization.” Mrs A.