Difficulties in consolidation of existing secured loan. Help appreciated.

gningo

My girlfriend currently has a property with a current value of £95,000. Her mortgage is £77,000 , a secured loan was taken out through a sub-prime lender which to settle would be £18,000, leaving no equity in the property. She has recently spoken with numerous secured lenders of which no-one can seem to help due to Loan to value but her intention is to repay her current secured loan and other small debts therefore needing a minimum £22,000 secured loan to consolidate these amounts into one lower repayment.

Yes, she has credit problems from the past and yes, there is not much equity available but the majority of lenders she has spoken with state that they provide 125% of equity which in my calculations should not be a problem.

We understand that borrowing extra isn't always the answer but in this instance it is necessary. As with the existing agreement finances are very tight. Due to this we would appreciate anyone who can give advice on why the 125% rule does not seem to apply and also if anyone can offer any information as to why a new secured loan paying off the existing loan does not free up the equity tied into the existing agreement? Any help much appreciated If anyone has had similar problems in lending under these same circumstances and was able to find a genuine lender to resolve the problems. Please state who this company was and that would also be much appreciated.

jonesMUFCforever

They can see problems in the past so why would they want to lend now?
125% rule is irrelevent if she will struggle to repay(despite your protestations about reducing monthly payments).
They can possibly see problems ahead if they have to realise their security.

gningo

But thats just it, she really would not struggle to pay and the proof is there for all to see. Although I appreciate what you have stated, its more that we cannot see why another loan replacing the one that is currently in place with a lower repayment should be a problem, more so than her credit past, as most lenders state they accept people with CCJ's (even bankruptcies in some cases) These are things she does not have. So why the problem? Surely a company would want her business knowing that no payments have been missed previously and that also, she would be paying out less every month which is one of the key areas they advertise when promoting their products.

lynzpower

a secured loan was taken out through a sub-prime lender which to settle would be £18,000, leaving no equity in the property. She has recently spoken with numerous secured lenders of which no-one can seem to help due to Loan to value but her intention is to repay her current secured loan and other small debts therefore needing a minimum £22,000 secured loan to consolidate these amounts into one lower repayment.

It could well be the fact that shes ran up extra debts when the secured borrowing was supposed to have put a stop to that.

I personally wouldnt lend to her.

Could she have a look at the debt free wannabee board for an understanding of how to manage her existing money more wisely?

jonesMUFCforever

You say that the majority of lenders she has enquired are willing to lend up to 125% of property value - why then if it is such a common thing to do will no one lend to her?
I think that due to her past problems you will have to accept that this will not happen in the short term and as has been suggested go to the Debt free wannabee board for tips to reduce other outgoings.

iolanthe07

Banks are becoming prickly about being accused of 'irresponsible lending' these days, and that, coupled with record defaults, is making them much more cagey about who they lend to and the amounts involved. You can only shop around, and avoid the sub-prime market like the plague unless there is absolutely no alternative - and even then go in with your eyes wide open. Good luck.

Xbigman

Has she checked her credit records? Her credit rating could be knocked down for a whole host of reasons not just defaults and missed payments. If she has been making lots of applications that will hit her credit rating.

You also do not mention how much she earns. Its not just equity and loan to value that they look at.

Does she have high unused credit limits on other cards or accounts? That could be coming off the theoretical 125% figure.

You say she has already gone to a sub prime lender, why? If her credit was good that should not have been nescesary. How long ago did this happen? If it was recent then lenders will view this with suspicion.
You also say the settlement figure is 18000. How much was the loan for originally? Was there PPI? Can she make overpayments?

Lastly. Consolidating to reduce outgoings can work but only in specific circumstances. I don't think she meets the criteria. Her best bet is to cut down on spending and start paying the highest APR stuff off. Its hard but it is often the best way.
Regards



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