Secured vs Unsecured Borrowing

desmonds

Can anyone please tell me why an OR can include your house as one of your assets if all the debt is unsecured borrowing.

Surely, the reason that it is unsecured in the first place is because it ain't secured on your property and secondly unsecured borrowing costs more 'cos its a higher risk to the lender, hence, why mortgage rates are lower than unsecured loans because mortgages are secured on the property and the mortgage lender has an interest mentioned on the sale.

So if one went bankrupt why should the OR want 50% of any equity left in the property?

Why should unsecured lenders have it both ways?

Paul

file_wizzard

desmonds wrote:

Can anyone please tell me why an OR can include your house as one of your assets if all the debt is unsecured borrowing.

Surely, the reason that it is unsecured in the first place is because it ain't secured on your property and secondly unsecured borrowing costs more 'cos its a higher risk to the lender, hence, why mortgage rates are lower than unsecured loans because mortgages are secured on the property and the mortgage lender has an interest mentioned on the sale.

So if one went bankrupt why should the OR want 50% of any equity left in the property?

Why should unsecured lenders have it both ways?

Paul

Technically all borrowing is “secured” if you default on an unsecured loan / credit card either you or the creditor can file for bankruptcy, additionally if an “unsecured” account has a CCJ issued against it the creditor can then go back and have a charging order made against any property that you own, therefore basically making it secured.

The secured / unsecured divide is also down to loan value, up until recently the most you could borrow unsecured was £15k , anything else was technically secured

desmonds

It has been possible for a long time now to get £25K unsecured, but, why unsecured if it does not mean that

One might as well go for one of those Ocean Finace loans that spread the cost which at least makes it more affordable even though the interest may be much higher.

I have an excellent clean credit file but would find borrowing money more and more diffiicult as creditors lending criteria becomes tighter.

The only lender that should have any first interest in a house is any secured lender and all the rest should rely on other assets excluding property.

I was always taught to stay clear of secured borrowing for that reason so that if problems ever arose your house was safe.

I suppose the only difference is that defaulting on secured borrowing then gives the lender a right to apply for repossession whereas unsecured can only claim assets on 50% of any equity giving the debtor an opportunity to buy off the OR his interest in the house.

Paul

file_wizzard

desmonds wrote:

I suppose the only difference is that defaulting on secured borrowing then gives the lender a right to apply for repossession whereas unsecured can only claim assets on 50% of any equity giving the debtor an opportunity to buy off the OR his interest in the house.

50% if the property is jointly owned by two people, as far as i am aware if the property was in a single name then the OR would claim 100% of any equity or up to the amount that would settle the creditors accounts?

Xbigman

Bankruptcy has nothing to do with unsecured or secured lending. The individual declares they have insufficient assetts to cover their debts. The OR then tries to realise *all* assetts, of which property is one type.
To talk about secured or unsecured debts in relation to bankruptcy is nonsense. The only way in which this is significant is to your creditors. Those with secured debts have a better chance of being repaid, those with unsecured must take pot luck.
It seems to me you are trying to write off debts by going bankrupt but keep your biggest assett. This is not on.
Regards



X

desmonds

Xbigman wrote:

It seems to me you are trying to write off debts by going bankrupt but keep your biggest assett. This is not on.
Regards



X

Rightly so, because unsecured lending should have no part to play in your house because it is unsecured.
If any lender wants to lend you money unsecured then that's their risk.

Businesses go into liquidation everyday and everyday people get ripped off, for example, pensions(Robert Maxwell)

The Directors never pay any assets off their homes but the company is "wound up" and all the secured creditors get first pickings.

I think that blame for lending is a major responsibility to the lender not necessarily the borrower and if they want to persist in aderts like the ones on TV day after day, monotonous advertising then if that encourages people to borrow more than they can afford and the lender is prepared to lend the money and they have all the info in front of them like credit reference searches to make their decision then tough.

There's too much blame and guilt placed on the debtor.

It's about time people stood up and played the creditors at their own game.

All they are bothered about is lending money at high cost and charging extortionate fees.

Look how Northern Rock are abusing peoples rights regarding PPI and how many people are not informed of what the interest rate is etc etc

You appear to be on their side.

Well, its about time we ripped them off too!!!!!

Percy_Vere

desmonds wrote:

Rightly so, because unsecured lending should have no part to play in your house because it is unsecured.
If any lender wants to lend you money unsecured then that's their risk.

Businesses go into liquidation everyday and everyday people get ripped off, for example, pensions(Robert Maxwell)

The Directors never pay any assets off their homes but the company is "wound up" and all the secured creditors get first pickings.

I think that blame for lending is a major responsibility to the lender not necessarily the borrower and if they want to persist in aderts like the ones on TV day after day, monotonous advertising then if that encourages people to borrow more than they can afford and the lender is prepared to lend the money and they have all the info in front of them like credit reference searches to make their decision then tough.

There's too much blame and guilt placed on the debtor.

It's about time people stood up and played the creditors at their own game.

All they are bothered about is lending money at high cost and charging extortionate fees.

Look how Northern Rock are abusing peoples rights regarding PPI and how many people are not informed of what the interest rate is etc etc

You appear to be on their side.

Well, its about time we ripped them off too!!!!!

A frankly laughable post.

I think you will find that Robert Maxwells son has lost everything due to his fathers behaviour.

You mention that 'I was always taught to stay clear of secured borrowing for that reason so that if problems ever arose your house was safe' - unfortunately you were taught incorrectly, it has always been possible for an unsecured debt to be secured against any asset you may have via the courts. Unsecured borrowing is at a higher percetange rate as it is more expensive for them to recover the money should you default and even allowing for the fact that they can secure it eventually there is a greater risk for them overall.

Responsible lending, yes I agree and we are moving closer to that ideal all the time however too easy and too much of a cop out to blame lenders for all our mistakes - take responsibility for your own actions unless you really want to live in a nanny state where everything is legislated because we are too stupid to think for ourselves. Banks are in business, they want you to borrow money in the same way that any business wants you to use their service/product. Over the years I have put on a few stone - am I going to sue M&S because they advertise that really nice chocolate pudding on TV ?

headchef

Desmonds
Believe me, XBigman and Percy Vere do know what they are talking about. XBigman has been through very tough times (I think it has included bankrupty) himself and come through the other side and takes time on here to offer his advice and guidance from his experiences. If you are having problems, the best thing I can suggest is for you to let us know more details - your identity is not known to us and we are all in the same boat to varying degrees.
By the tone of your orginal post I guess you've just had a run in with a creditor and are feeling a bit venegful maybe?!
Your best course of action is to be open and honest on here and then you can make informed choices.

Xbigman

I just reread my first post and I apologize for the harsh tone. However, what I said is correct.
In your responce you mention companies going under but the directors being untouched. This is true for 'limited' companies. A limited company is in effect a legal and financial entity, just like a person, and it can go bankrupt without affecting the directors or workers. But all the companies assetts, secured or not, will be used to pay debts.
In the case of an individual bankruptcy it is an individual that is bankrupt. His wife could get off scott free despite helping to spend the money. Or alternatively she could get stuck with all the joint debts herself. In any event the type of debt usually makes no difference as to what happens.

Let me put this another way. Secured debts are secured on 'things' you own, unsecured debts are secured on 'you'. If you go bankrupt 'you' and the 'things' you own are all covered under the rules.
Regards


X

desmonds

Percy_Vere wrote:

A frankly laughable post.

I think you will find that Robert Maxwells son has lost everything due to his fathers behaviour.

You mention that 'I was always taught to stay clear of secured borrowing for that reason so that if problems ever arose your house was safe' - unfortunately you were taught incorrectly, it has always been possible for an unsecured debt to be secured against any asset you may have via the courts. Unsecured borrowing is at a higher percetange rate as it is more expensive for them to recover the money should you default and even allowing for the fact that they can secure it eventually there is a greater risk for them overall.

Responsible lending, yes I agree and we are moving closer to that ideal all the time however too easy and too much of a cop out to blame lenders for all our mistakes - take responsibility for your own actions unless you really want to live in a nanny state where everything is legislated because we are too stupid to think for ourselves. Banks are in business, they want you to borrow money in the same way that any business wants you to use their service/product. Over the years I have put on a few stone - am I going to sue M&S because they advertise that really nice chocolate pudding on TV ?

Well people have sued tobacco companies and yes it is wrong for companies to sell food that is not good for us.

We have been fed so much crap and lied to about food, deceived into thinking it is good for you when it is filled with gluten and salt and sugar.

Subliminal advertisng that is so fast that we consciously do not know we are seeing but subconsciously our brains are taking it all in.

Loan adverts on kids TV channels is outrageous and wrong and should be banned.

So, yes I do blame financial institutions because they are totally to blame for the buy now pay later culture.

If it wasn't for legislation then we would not have the FSA and Banking Ombudsmen and Banking Code.

What would it be like if none of it was regulated.

desmonds

headchef wrote:

Desmonds
By the tone of your orginal post I guess you've just had a run in with a creditor and are feeling a bit venegful maybe?!
Your best course of action is to be open and honest on here and then you can make informed choices.

On the contrary, I have not had any run in with any creditor.
My credit history is top-notch but up-to-the-hilt!!!
I had an injury at work last Feb which left e out of work for 2 months but since then work has really been in short supply 'cos I work for an agency as a locum.

So, I'm looking ahead and weighing up the possibilities of not being able to keep the boat afloat.

Things are looking better 'cos I have just been offered a full-time job which will earn me £25-30K annually plus overtime.

I will weigh up the pros and cons and if going for a clean slate suits me better than another 10years of debt payment through the likes of Payplan or CCCS then that is what I probably will do but one has to minimise the damage and come out the other side at least with a roo over ones heads.