Restructuring has become a bogey word in the world of consumer lending.
The concept seemed attractive, especially to young people who might be struggling to meet payments on a mortgage and on a number of smaller debts. It was an easy sell for the institutions - restructure your borrowings by rolling all the loans into a single debt spread over a longer period of time, typically the length of your mortgage.
However, consumer advocates have been quick to criticise the practice. As they see it, rolling up loans is merely encouraging people to increase their indebtedness. The lower mortgage rate levied on the debts reduces monthly payments, tempting people into the possibility of extending themselves again.
Further, by rolling their shorter-term loans into a long-term mortgage, customers end up repaying more to the banks over the full term of the borrowings.
Financial services group Cornmarket aims to change this perception. The insurance and mortgage broker, which has been providing financial services to public service workers for 32 years, has put together a special roll-up option that allows customers the benefits of lower interest rates without spreading the payments over a protracted period.
Cornmarket - which is 75 per cent owned by Irish Life & Permanent but operates on an independent basis - enables people to pay existing loans over the same repayment period as before while offering them a mortgage interest rate of 3.5 per cent APR.
The interest rate is not the lowest on the market - variable rates currently range from 3.3 to 3.6 per cent APR - but it is considerably better value than the high single-digit rates being offered on car and term loans.
"This sort of scheme could be offered by anyone but it is just not in banks' best interests," says Cornmarket mortgage manager Mr Alain Rolland.
Figures produced by Cornmarket (see table) illustrate the savings that can be made. Even leaving aside the mortgage element, there is room for disciplined borrowers to save substantial amounts over the life of their loans.
"It's a myth that people restructure only because they are in trouble with their loan repayments," says Mr Rolland, who stresses that Cornmarket has no interest in simply stretching a two or three-year loan over a 20-30 year period to lower monthly payments.
"There may be a valid reason for such a move: for example, a household under financial strain where there are two salaries reducing to one for family or other reasons."
The availability of lower interest rates also makes it attractive.
Mr Rolland strongly opposes the idea of remortgaging to borrow more money. "It's about getting a better deal on their \ loans."
Like all remortgages, there are legal costs involved. While the standard fee is 1 per cent of house value plus VAT, Cornmarket caps fees at €1,100 and €1,400.
