Thursday 29th of October 2009
Indebted homeowners considering adding their personal borrowings to a mortgage may want to consider an individual voluntary arrangement (IVA) as a better way of clearing unsecured debts.
Some people may believe that one, larger debt is easier to manage - but it is worth considering the effect of interest, according to the Guardian.
Virginia Wallis, writing for the newspaper, said: "I certainly wouldn’t recommend adding credit card debt to the mortgage, since turning a short-term loan into a long-term loan will mean paying interest on it for longer - making it more expensive in the long run."
An IVA could freeze interest rates on unsecured debt - such as credit card bills - and negotiate repayment periods with creditors so that a debtor is paying what they can afford each month.
This could mean that credit card bills can be paid off far sooner, in light of Ms Wallis’s cautionary note about combining them into long-term debts.
Another benefit of an IVA could be that, by tidying up personal debts, a homeowner’s mortgage payments may become easier to find each month.
By Rachel Powell
- House price rise 'may not indicate recovery'
- Equity release 'needs to be increased'
- Need for IVA help could increase as expert predicts reduction in lending
- Government announces 'breathing space' for those needing IVA help
- Lack of subprime lending creating need for IVA help, expert suggests
- IVA advice may support youngsters' lifestyle changes
