Secure loan?

Helpus_3

I posted on here last week
http://forums.moneysavingexpert.com/showthread.html?t=1089981&highlight=Helpus
and am not sure where to go next. I have had to go and see a Doctor as I just am not coping at all. He has given me propanalol to help calm me down as I am having what I can only describe as a panic attack in the morning, evenings and all through the night. The tablets haven't really helped to be honest just added another £7.10 on to my debts for a 2 week perscription!

Anyway. The mortgage advisor thinks we shouldn't get a new mortgage as the rate we are on is okay but wants us to take out a second charge loan for 40k at 6.9%. On the face of it this seamed okay but the more I read, the more I am not sure. It seems as if most secured loans have variable apr so the loan could shoot up in price? The idea is that is would be a short term loan in a way over say 5 years when hopefully house prices would have rose enough to warrent selling our other house to replease the equity in that and pay off the loan. I don't think you can over pay the loan but I think we can overpay the mortgage as its interest only. The loan can be got out of but we would have to pay a months interest to be released plus all the balance. We thought that if for any reason we could no longer pay the secured loan, we could put the balance back on to the credit cards. Hopefully it would never come to this, but at least the money would no longer be secured so we could default on it? Also I have heard that we wouldn't be able to ever change our mortgage without paying the 40k secure debt first?

On a positive note, even though I felt I couldn't do it, I went into work on Sunday at 6am until 1.30pm at double time and it wasn't too bad! If I did this just 2 Sundays a month I would get an extra £182 and still be home in time to do something with the kids! I actually felt good to be doing something about the debts even though its a drop in the ocean! The feeling of dread and tightness in my throat and chest came straight back though the second I walked through the door to the house though

I am sure this house has something really bad about it. I know I can't blame anyone for my debts except us but when we bought the house, the people here had depression and now have gone bankrupt only a few weeks ago losing their new home, we then purchased the house and the woman we rented it too ran up massive debt here, trashed the house, left then killed herself then the next person we rented too managed to get into debt too, then got depressed and didn't leave the house and trashed it a little bit more! Now we are here and the bad feeling in this house is obvious and I can't see me going the same way they did. Already I haven't seen anyone for weeks except at work which I have to make myself go to, I have isolated myself and the kids poor things and don't even answer the door or phone for no reason really.

stapeley

Adding a secured loan to your debts is not the answer. Please ring one of the debt charities. But generally you should remember that you must pay all your main bills first , rates ,mortgage , electric etc .Cards and unsecured loans should not be paid if you have not got the money . The worst thing to happen with them is they will take you to court , but a judge will not order you to pay more than you can afford . You can offer to make token payment this will help you case . Other will be on shortly with other advice . It may help to look through other threads to see how others have dealt with debt . It is certainly no good making yourself ill about it . Post afew more details and more detail advice will be given .stay strong !

rayday2

Please do not secure a loan on your property, if there are problems meeting unsecured credit then there are ways you can freeze interest on those products and make payments you can afford lower than the minimums they ask for, in order to do this please speak to the CCCS (or online if you can't face ringing at the moment), Payplan or National Debtline.

You are right loans can go up and they do mine went up 3% when interest rates only went up 1% and I got into more difficulties plus now it was all secured against my property. There are not many things I change in life but give me a time machine and that would be mine!

Helpus_3

Oh I just don't know! Our repayment history is good at the minute and having checked our credit files there is nothing adverse. other half has already spoke to cccs who have just said to do token repayments which will give us an awful credit history, phone calls, letters etc and they have still said it would take us 58 years!
I understand that securing the credit could leave us with bigger problems but I just can't see another way out. Is our situation made any better by having the other house? We have tenents lined up for moving in for te start of September and whilst they are there that is covering itself. When properties do start going up again we would be able to sell that one and pay off a big chunk of the mortgage.

rayday2

Well its entirely your decision, but if your income goes up in September then surely your DMP will reduce in time too?

You have to feel happy with whatever decision you come too, but I wish someone had stopped me securing debt lol Also taking out a secured loan does lower your credit rating too its a sign to the industry that you are over stretched - I admit not was bad as a DMP.

Miggie

I too used to get panic attacks when thinking about our money/debts, and used to work as many hours as possible to try and keep up with them. I can't advise you as such but our story is...

We have debts of approx 60K which were run up partly by consolidating loans and credit cards and then using the cards again. We were going to get a secured loan but after reading some of the threads on this forum decided to contact Payplan instead.

First Direct had offered us a loan at 6.1% and we intended to pay it off after 5 years by remortgaging. My worry was that if we took out a secured loan, then not only would the interest on the loan rise to the extent that we would get into difficulty, but we would also continue to use our credit cards and possibly (probably) run them up again. Also, our mortage company said that having a secured loan would deter them from offering us a bigger mortgage if the loan was for debt consolidation. This would mean that we might not be able to pay the loan off after 5 years and be stuck with it for much longer.

I contacted Payplan who worked with us and our creditors to reduce our payments from 1100 per month to just under 400 per month (which is less than the payment to First Plus would have been, even assuming that the interest rate didn't rise). Each creditor has agreed to suspend interest. If we can't increase payments then it will take approx 12-13 years to pay off, less than the 25 years of the secured loan.

With regard to letters and phone calls, we changed our phone to a cheaper provider when we set up with Payplan and didn't give the new number to our creditors. Any letters we get, we either send to Payplan for action, or ignore as appropriate. My husband had one phone call from Egg whilst at work and they just asked him to confirm that we were setting up with Payplan. Even MBNA who some people have found difficult have been ok.

Payplan have said that they will help us get a new mortgage in 3 years time when we come off our fixed rate and have said that their mortgage specialists can still get us a discounted rate so we aren't worrying about that yet.

Our credit rating is lousy now, but I really don't want credit again. I still get shaky when I think about the size of our debt, but at least now I know exactly what our debt repayment is, and we have more money to live on now than we did before.

I wish you all the best in making your decision.