Smaller loans to take the pain of financial strain.

The new year is renowned for its financial hangover with a strain on household finances following the busy festive season. Finding ways to manage store and credit cards by consolidating debt into a more affordable secured loan could be the financial work out you need to get the bank balance back into good health.

That’s why Together has launched a new second charge smaller loan designed to help customers on the road to financial fitness.

A second charge loan means that the borrowed amount is secured against the equity in the property that you own. With loan sizes starting at £20k up to the value of £50k, loans are offered over a 2 or 5 year fixed period at a fixed interest rate (with rates starting from 2 year fixed at 12.20%, and 5 year fixed at 10.35%). Offered with a lower arrangement fee, reduced from £1,495 to £995.

As an example, a mortgage of £30,000 payable over 18 years, initially on a fixed rate for 5 years at 10.35% (and then on a tracker rate for the remaining 13 years at 2.00% above the Together Homeowner Managed Rate (THMR)) would require 60 instalments of £323.05 followed by 155 monthly payments of £342.22 plus a redemption administration fee of £110.00.

The total amount payable would be £72,869.32 made up of the loan amount (£30,000) plus interest on the loan (£39,345.38), arrangement fee (£995) plus interest on this fee (£1,203.32), the broker fee (600) plus interest on this fee (£725.62) and the redemption administration fee (£110.00). The overall cost for comparison is 12.3% APRC representative.

With a second charge loan, customers can access funds quickly in order to consolidate debts into one manageable payment in order to reduce outgoings and expenses without disturbing their first charge mortgage, which could have Early Repayment Charges and be on a lower interest rate. Consolidating your debts into one manageable monthly repayment could also reduce the stress of managing multiple debts, and could leave you with more disposable income at the end of the month so you can spend money on the things you enjoy!

Together’s common sense approach to lending means that the new smaller loans can be secured against a range of homes including non-standard properties. Customers who are self-employed or have complex incomes are also considered.

Through managing debt and settling credit card balances in full, customers can avoid steep interest rates which, according to Bank of England data, could mean paying the highest interest in 27 years, with average rates hitting 23.8% in October 2023.

Please note that as well as the benefits, there are potential risks when consolidating existing debts into a new, single loan. For example:

• You could end up paying more overall and over a longer period of time,
• It may be more difficult to come to a new agreement with a single lender if you get into difficulties,
• If you don’t pay off your existing debts, you may struggle to make the payments on top of the new loan,
• If you fail to maintain your regular payments, your property is at risk of repossession.

It is also essential that you ensure that you understand any additional costs associated with setting up your new loan and settling existing loans.

Here are some more new year money saving tips to help get your finances back in shape:

Start a budget

• Work out essential and non-essential spending.
• Include important social engagements and special occasions into your budget.
• Plan out realistic amounts for budget categories.
• Look back every month and review your spending.

Sign up for cash back apps

• Take advantage of apps that pay a percentage of your total spend.
• Sign up for sites such as Quidco and Top Cashback and earn funds back when you spend.

Cook at home

• Food has become more expensive and can also eat heavily into your budget
• Improve your skills and create healthy nutritious food at home to avoid the added cost of eating out.
• Resist the takeaway urge by creating your own “fakeaways” at home.

Sell old unwanted items and cancel unwanted services

• Declutter and turn unwanted items into much needed cash.
• There’s a range of apps and sites to use to sell virtually anything – from clothes to collectables.
• Conduct a study of your services and subscriptions. Which can be switched or ditched to save on monthly outgoings?

Delay the purchase of non-essential items

• Work out if it’s something you really want and stop making impulse purchases by delaying the purchase of non-essential items.
• Take time out to decide if you want the object one month later to reduce on superfluous spending.

You should think carefully before choosing to use a secured loan to repay credit which is unsecured, because with a secured loan, your home may be at risk if you do not maintain the repayments. In addition, when using a loan to consolidate other debts, you may increase the total amount repayable.