Mortgage lenders use different rules to work out how much they can lend. For example, some of the business rules can be:

• Single Applicant – Three times the borrowers annual salary – sometimes more
• Joint Applicants – Two and a half times the joint salaries, or three times the  higher salary plus the lower salary.

Lenders base their loans on the borrower’s gross income before tax. This can sometimes include regular overtime or commission. They also look at the regular outgoings (expenses), like:

• Payments on other loans
• Service charges on the property
• School fees for children

If your bank account regularly goes over your arranged overdraft limit, you will have to pay extra interest and charges. Your bank could also cancel your overdraft limit or refuse to renew it when your agreement runs out. If you lose control of your bank account, it can become very difficult to manage your business and household finances.

Unpaid cheques, direct debits and standing orders will make your debt problem worse and any money paid into your bank account may be taken up by interest and bank charges instead of covering payments you need to make. You may find it easier to change your overdraft into a loan. Remember, you may lose your overdraft as the bank will often make it a condition of the loan that you keep your current account in credit. You will also be committed to making payments towards the loan each month. Make sure you can afford this and make sure the interest rate on your new loan is no higher than the overdraft rate was.

Student loan consolidation is combining several loans into one with a new repayment term and interest rate. This is generally offered in connection with federal loans. Here’s how to help identify potential problems related to loan consolidation:

Avoid lenders and marketers who use high-pressure sales tactics. Some marketers pitch that “your interest rates may go up if you do not consolidate immediately!” Whether and when interest rates for consolidating your loans will change depends on what type of loans you have. Look at your loan documents to determine whether the interest rates are fixed or variable:

— If all of your education loans have fixed interest rates, there may be no deadline to consolidate.
— If some or all of your loans have variable interest rates, when you consolidate into a fixed loan it may affect the interest rate of your loan.

ED publishes new variable rates for some federal loans each July 1st. The annual rate changes can raise or lower the interest rate offered on a consolidated loan because the consolidation interest rate will be the weighted average of all loans consolidated.

Whether or not you have a targeted timeframe, take your time to determine whether consolidating is right for you.