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Can I borrow more than I owe?

When it comes to sorting out their debts a lot of people opt to take out a consolidation loan. This type of loan is designed to pay off everything that you owe and should be targeted at a loan product with a lower rate of interest and a fixed repayment time to save you money and to ease the pressure of your debts.

In most cases people in this situation will simply take out a personal loan, either secured or unsecured, from their bank or other lender. They will work out what they owe and aim to borrow that amount so that they can pay off all their debts at once. But, given that this kind of loan can drastically reduce how much you have to pay each month to service your borrowings, a lot of people actually borrow more than they owe on the basis that they’ll still be paying back less than before.

So, for example, let’s say that you owe £5,000 on credit cards. You look at loan rates and find that borrowing this amount in a personal loan actually leaves you with a lot of cash to play with every month once you’ve made your repayment. So, you look at borrowing a little more. Maybe there is something you really want to do with the extra cash or maybe you simply want a little extra cash to tide you over in the future.

The question here shouldn’t really be ‘Can I borrow more than I owe?’ but ‘Should I borrow more than I owe?’ It’s all too easy to get carried away by the money you’ll be saving by taking a consolidation solution. But, the last thing you should look to do is to put yourself in a situation somewhere down the line where you get into financial problems again.

  • Given that most personal loans simply look at your income and financial track record to assess your ability to make each monthly repayment, you may well find that you could qualify to borrow more. Many lenders won’t even ask what you want to borrow the money for – their main concern is whether you can pay it back.

    Your key aim here should be to make a budget to see exactly how much money you have spare each month once you’ve paid your essential bills like your mortgage, rent, council tax, utility bills and living costs. The money you have left over here can be put towards loan repayment but you also need to make sure that you factor in other costs for emergencies and so on.
So, borrowing more than you need may not be an issue if your monthly loan repayment still leaves you with plenty of cash to tide you over for the rest of the month. But, if it leaves you tight then this probably isn’t something you should be doing.

This is an especially important consideration if you are using your home as collateral for a secured consolidation loan. The last thing you want to be doing here is to try and solve your debt problems by getting deeper into trouble and putting your home at risk. So, think hard and take a long look at your finances before you make a decision either way.
| Serious Debts | Debt Counselling | Debt Consolidation Program | Debt Consolidation calculator | Debt Consolidation Case Study | Debt Consolidation Companies | 30 days grace from debt collectors |
| Loans | Mortgages | Debt Consolidation is a Bad Idea | County court claim - what to do | Move abroad - will all debts be written off | Interest free deals can get you into debt |