Loans: Secure vs Unsecured

Simulacraton

Hello

I am a homeowner with decent equity on my home.

I've had a troubled few months due to losing, not one, but two jobs one after the other and then having a really hard time getting back to work this time. Before this I was financially sound, but as I had to miss some mortgage payments and some issue with my normal credit card payments I now have some black marks on my credit file.

Happily, I am now back to work and I want to consolidate all my debt and spread it over a longer period so I might have some breathing space.

An unsecured loan will take many months to be approved as I was out of work and hit a rough spot. My question is are the criteria more lax with a secured loan as there is less risk for lenders. I have done my sums and know I can make repayments far more easily than I can with my three creditors (2 CC's and one unsecured loan).

Any constructive thoughts?

Thanks.

Pixie5740

No the criteria isn't more lax for secured loans. Maybe back in 2007 if you took out a secure loan with the likes of Ocean Finance but that market dried up in 2008. To get a secure loan now you need decent equity in your property and a good credit history.

Debt consolidation rarely works anyway, that's what the lenders are banking on. You consolidate and end up back at square 1 with twice as much debt.

Put together a statement of affairs and post it on the Debt Free Wannabe board. You'll get lots of support there and advice on the most efficient way of paying off your debts.

Foxy-Stoat_3

Think carefully and read all terms and conditions of whatever loan you decide on. As others will tell you, turning unsecured debts into secured debts secured on your home isn't always a good move, but maybe good for you.

I was thinking about doing just this and had a secured loan agreed but decided not to proceed after reading the credit agreement as under the terms of the loan the lender could transfer their interest to a.n.other company if they liked and increase the interest rate with only 7 days notice for any reason which I was not happy with.

Debt consolidation is a tricky one as you need to address the cause as well as the cure.

Unsecured loans will take less time than secured loans, assuming you find a lender that will accept you on your circumstances.

Good luck.

SeanG79

It is never a good thing to turn unsecured debt into secured debt.

There are lenders who will offer secured loans with adverse credit history. Your mortgage will usually need to be up to date and you would need sufficient equity in the property (with the new loan, less than 75% loan to value).

As mentioned above, think very carefully before as it is rarely, if ever a good idea to convert unsecured debt into secured debt.

thebritishbloke

There's a load of horror stories on these forums about people who did the exact thing you're thinking of and for very similar reasons, it can end very badly. If you lose your new job and can't find a new one for a few months, boom your house is gone.

Foxy-Stoat_3

thebritishbloke wrote: »

If you lose your new job and can't find a new one for a few months, boom your house is gone.

I wouldn't happen quite that quickly, but essentially.....BOOM your equity used to secure your loan on is gone.....and BOOM your mortgage will be cleared...and BOOM you will have to live in rented accommodation for the foreseeable future IF it all went bad and you couldn't get back on track quick enough.

Simulacraton

Ok, thanks guys. Some sound advice methinks.

I shall not go the secured route. Have to weather the storm and just carry on budgeting till debts get cleared I guess.

moohound

Taking the 'hard route' and living frugally for a shorter time, and getting it paid off ASAP, will pay dividends in the long run, though it might not seem like it at the time.

Do budget for an emergency fund though especially as you are a homeowner, it may save you a headache in the future.