If you are looking at lenders who arrange debt consolidation loans you probably have credit problems. If you are a homeowner, one solution could be mortgage refinancing.

Consumers who use debt consolidation loans secured on their homes are mortgage refinancing. The idea is to reduce your monthly payments and secure a lower interest rate by having all your debts, outstanding credit card balances and loans consolidated into one easy to manage loan with a better rate. You should always think very carefully before deciding to use any value you may have in your property to borrow additional funds to pay off debts that may have built up through every day living expenses.

Remortgaging your home for debt consolidation is a short term solution to save money on interest payments from expensive credit cards and personal loans. Think carefully before securing other debts against your home. If you do decide to refinance your mortgage it is important to prioritise what debts to pay off first.

Debt consolidation loans - Which debts to pay off first

The money raised for debt consolidation by remortgaging should be used to pay important debts first. You will need to be clear on which debts will have the worst consequences if not paid off quickly. For example you might lose your home, your possessions, and even be sent to prison.

It is also good to know which debts are costing you the most in interest payments, this will help you identify priority debts; which debts to pay back first.

Priority debts: This is a quick list of some examples and consequences;

Tax: Failure to pay your taxes could mean that you are made bankrupt and in some cases be sent to prison.

Utility Bills: Failure to pay electric and gas can result in you being disconnected.

Hire purchase (HP) debt: If what you are buying on credit is essential it is a priority, for example a car that you need to get to work.

Mortgage: You need to keep up with mortgage payments, the mortgage lender can take legal action to take possession of your house and sell it, for what ever price they want. If the price they get is less than the remaining debt you will still be liable for the balance.

Other priority debts include business rates, council tax, court fines, and maintenance and child support payment.

Failure to pay these debts can result in the use of bailiffs to come into your home and take your goods away to be sold to pay your debts. If you still owe money after your goods have been sold there is a possibility that you might be sent to prison.

Non-priority debts: Failure to pay these debts may not result in you losing your home or being sent to prison but you can still be taken to court and ordered to pay what you owe, extra court costs will be added to you debts and failure to pay may result in a visit from the bailiffs to seize your property.

Some examples of non-priority debts include: bank overdraft and loans, credit card and store card arrears, catalogue arrears, non-essential goods brought on hire purchase, and even money borrowed from friends and family.

In summary, mortgage refinancing can be a used for debt consolidation but it is important to work out exactly which debts to pay off first and in what order.

Debts that can result in bankruptcy proceedings are one of the highest priorities. Once bankruptcy starts, any leeway your other creditors gave you will disappear as they try to protect their debt from the other creditors - its very important to respond to any court claims as soon as you can and get advice.

You can find useful information and links about mortgage refinancing and debt consolidation on the Regency Remortgages website. Based on information from the Directgov website.