Anyone up for a challenging financial question?!

vince_moaloka

When my business closed a year ago I was left with a £34,000 commercial debt owing to Natwest. They have a charge over my property. I have negotiated a full and final settlement with them of £15,000. My credit rating is not good since the closure of my business, so I can’t get an unsecured loan for the £15,000, and I can’t remortgage because I fell into arrears on the mortgage within the last 12 months, although these are now paid.

If I can get rid of the Natwest debt by paying them £15,000, I will have £25,000 equity in my property. If I don’t pay them the £15,000, they will take my property and I’m left with nothing.

I can get hold of £10,000 from a third party towards the Natwest full and final settlement so I’m left searching for the remaining £5,000. Now here is the crucial question:

I have a flexible mortgage plan policy with L&G worth almost £7,000. The policy has been running for 8 years and has 17 years left to run. Am I better off releasing £5,000 from that policy (I’m not even sure of the terms/penalties etc) and start rebuilding the policy back up? Or is it better to try and find the remaining £5,000 for Natwest somehow - a friend’s credit card is one option, or maybe a friend taking out a loan on my behalf. I just don’t know which is the more viable option long term; the L&G policy has critical illness and life cover and is a pretty good policy, the type which I understand is not so readily available these days. But I don’t need to cash it all in, just £5,000.

Being that my property has escalated in value, I don’t necessarily have to rely on the flexible mortgage plan to repay my mortgage at the end of the term, but nonetheless if the policy is likely to give me a better return than the amount I have to repay on a £5,000 loan, I’d rather keep the policy.

Thanks in advance of any replies!

Conrad

As a general comment it is better not to borrow especially given the set of recent events you have endured. Cashing in a savings plan at a time of need when the alternative could put you under yet more pressure seems to be the way to go.