Debt Consolidation Guarantee Loan
Did you know that you can combine all of your debts into one streamlined repayment using a debt consolidation guarantee?
With the help of a guarantor, you can consolidate your debts into a single loan even if you don’t have a deposit.
The guarantor is usually the borrower’s parents. In some cases, lenders may accept close relatives or friends as the guarantor.
What is a debt consolidation guarantee?
A debt consolidation guarantee is a type of guarantee that allows borrowers to repay all of their credit debts. This can include your credit cards and personal loans, all rolled into one mortgage.
The guarantor provides their home as security for the loan. This reduces the risk to the lender allowing you to borrow 100% of the property value.
Having a debt consolidation guarantee also significantly reduces the interest you pay.
How much can I borrow?
Typically, lenders may allow you to borrow up to 110% of the purchase price with the help of a guarantor.
However, the debts you have must be less than 5% of the property price.
This strategy allows borrowers to step into the property market without having to wait to repay their debts, which normally takes several years.
Usually, the loan amount is enough to cover the purchase of the property as well as all other associated costs, including legal fees and stamp duty.
Call us on 1300 889 743 or fill in our free online assessment form to find out if you qualify for a debt consolidation guarantee loan today!
What requirements do I need to meet?
Applications for debt consolidation guarantee loans are considered to be high risk to the lenders as the borrower is already in debt. This is reason why many lenders have a strict policy for these borrowers.
As a general rule, a borrower must have made perfect repayments on their debts for the last three months, in some cases up to six months.
Most banks will assess your loan application on a case by case basis.
How does it work?
Simply, a debt consolidation guarantee loan allows a borrower to combine their debts into one loan.
This can include your credit cards, personal loans and any other debts that you may have. However, the debts shouldn’t exceed more than 5% of the property value.
How do banks assess my debts?
There are cases where the borrower has debts even if they’re responsible with their finances or haven’t overspent their credit.
When assessing your debts, banks usually try to determine whether your living circumstances is the reason for your debts.
Before you decide to be a guarantor for another person’s loan, ask yourself:
- Are you spending more than what you earn?
- Are the debts due to normal circumstances such as a business failure or loss of job?
Find out if you qualify for a debt consolidation guarantee loan by giving us a call on 1300 889 743.
Purchase and debt consolidation
A lot of first home buyers have unpaid debts including credit cards and personal debts when they decide to buy a home.
Obviously, it’ll be difficult to take out a home loan and try to juggle various financial commitments. Instead, rolling all of your debts into one loan will help ease your stress.
Despite this, these borrowers usually don’t have enough funds for a deposit or may not have any savings at all, as they’re already in debt. This means that they’ll need to borrow 100% Loan to Value Ratio (LVR) to buy a home.
Most banks are wary of borrowers with debt so borrowing 100% of the purchase price may be out of the question.
Regardless, there are lenders that may be willing to do this if you can provide an appropriate guarantor who can provide their property for additional security. Some lenders will even allow you to borrow 110% of the value of the property to consolidate your debts.
Refinance and debt consolidation
Most lenders will decline your request to combine your debts into your existing loan repayments if you don’t have enough equity in your property.
However, with the support of a guarantor, you can refinance your debts into a single payment.
You can even avoid paying Lenders Mortgage Insurance (LMI).
It’s important to note that only a handful of lenders offer this service.
You can speak with one of our mortgage brokers by calling us on 1300 889 743 or by filling in our free online assessment form. They specialise in guarantor mortgages and can help you find the right lender who can meet your home loan needs.
What risks are involved?
Although a debt consolidation guarantee loan allows the borrower to manage their debts and buy a property, the guarantor can still be placed at risk.
Ultimately, the guarantor will be liable for the loan if the borrower fails to make the repayments. In this situation, if both the borrower and the guarantor are unable to make the repayments, the bank will have no other option but to sell the property.
This is why it’s recommended that you speak to a legal professional to get legal advice before you decide to be the guarantor for someone else’s loan.
How can you mitigate risks for the guarantor?
There are a few ways that can help reduce the burden on your guarantor. These include:
- Not taking out a new mortgage until the home loan has been reduced or has been removed completely.
- Releasing the guarantee as early as possible.
You can call us on 1300 889 743 or fill in our free online assessment form to get more information on this.
Debt consolidation guarantee FAQs.
Is a debt consolidation guarantee loan right for me?
A debt consolidation guarantee loan helps you combine your debts into a single mortgage. However, lenders will only consider debts up to 5% of the property price.
It’s suitable for people who have made all of their repayments on time and are in a strong financial position.
Speak with our mortgage brokers today!
Our mortgage brokers specialise in guarantor home loans. They can help you find a suitable lender that can meet your home loan needs from our list of almost 40 lenders.
Not setting up your mortgage properly may put the guarantor at a higher risk!
You can speak with one of our brokers who specialises in guarantor supported home loans by calling us on 1300 889 743 or by completing our free online assessment form today!