Secured loan with bad credit

lookingforthelight

Hi all,

I have very luckily inherited a house worth £230,000.
I also have a very bad credit file with defaults and late payments.
Fortunately no CCJs and Im not on an IVA. I made my own arrangements to make low payments to credit cards and unsecured loans.

I want to put this windfall of a house to good use, what is the best way without having to sell it.

With my bad credit, I think a mortgage would be out of the question.

So I was thinking of getting a secured loan over a long enough term to make the payments affordable.

I know I'm turning UNsecured debt into secured but I'm sitting on tons of equity and am using Martins budget planner to make sure I will be affording the repayments.

Is this a decent plan or is there another way?????

Thanks to you all.

~Beanie~

With defaults and late payments, you are unlikely to get a secured loan either.

Are you still in arrangements to pay or have you cleared your debt now?

FireWyrm

Is this a second home? Why dont you rent it out? With a value of £230K, it has to be in the south-east somewhere which means potentially huge returns (even after tax) on rental income.

If this is your main residence, why dont you move into a cheaper rental somewhere, get yourself under control, use the rental income to pay your debts and then, in 5 years, decide what you want to do about it?

An alternative might be to take in a lodger? I know it is inconvenient, but I believe you can earn somewhere north of £5K a year without paying tax. I forget the exact figures and you would obviously have to do some research, but you could put all that income to good use. Meanwhile, lodgers have a lot fewer rights when it comes to getting rid of them than true tenants. You can also keep an eye on them and the house.

Toomuchdebt

I'm confused-if you've inherited it then what payments are you talking about?Surely you now own it outright?(Please correct me if I'm wrong)If you don't want to live in the house then just sell it-why have the hassle and stress of a second house to cope with?Renting it out is all very well but could you afford repair bills/painting/carpets/coping with bad tenants who wreck it? Doesn't sound like you have enough disposable cash in case of things like this.I'd move into it thus getting rid of rent payments, or sell it and pay off debts.

Tixy

What is the situation with your debts currently?
You say you have arranged repayments plans - are any of your creditors charging you interest still?

Based on your current repayments how long will it take to clear your debts?

If you are going to live in the new house and your expenses will go down due to not having to pay rent/mortgage or if you can rent it out so your income increases then you could presumably afford more to your debts each month. On that higher repayment how long would it take you to clear your current debts (without taking out a loan)?

lookingforthelight

To clear confusion for one replier.
The low payments I am currently making are for my current debts and will take approx 7 years to pay off.
Interest and charges are frozen.

I am currently renting and want to move into the house. The saving on rent would be ploughed into my debt to pay debt off 2 or 3 years earlier.

However, I would like to settle my current debts (with a secured loan) and "close the book". My credit file would look better as the bad debts would be marked as closed/settled and I would just have a new debt but with up to date payments showing.

Renting out the new house is not possible. The maths dont work. And theres no space for a lodger.

I did a little research on secured loans and got the impression they were less stringent than mortgages.

Thx

Tixy

However, I would like to settle my current debts (with a secured loan) and "close the book". My credit file would look better as the bad debts would be marked as closed/settled and I would just have a new debt but with up to date payments showing

What shows on your credit file currently? How old are the defaults on your file?

It may well not make your file look better (or improve it quicker) and as you would likely be looking at the very sub prime end of the market could cost you thousands in interest (obviously depending on how much your debts currently are).

What will be the main reason for you wanting to improve you credit file?

Toomuchdebt

Thanks for clearing that up-in your position I would prefer to just move into the house and use the rent money to throw at the debts.I certainly wouldn't want to get a secured loan-bear in mind also that if your credit is really bad then interest rates even for a secured loan might be really high and you may not end up saving any interest.I wouldn't like to risk a secured loan in this situation.

FireWyrm

lookingforthelight wrote: »

I did a little research on secured loans and got the impression they were less stringent than mortgages.

Thx

Nope. It is a mortgage in all but name. You can still end up losing the house and in fact, there is probably a danger of this as it stands if your creditors get wind of your good luck.

Why dont the maths stack up with renting? Rents in the SE are high at the moment, you could pimp it out, pay off your debts and still have no danger to the house.