Secured Loan question

ohiwonder

Hi Everyone,

I'm a home owner (mortgaged, 6 months into a 2 year fix that can't be amended) and currently have an unsecured loan of 25,000 over 7 years that we did for home improvements.

We've been hit by another couple of issues (car replacement and some more home maintenance) and after speaking to our bank to gain another loan they aren't keen due to it not being secured on anything. They recognise we've done our numbers and can afford it, but its not secured, so there is risk, fair enough.

I've had a quick look at secured loans, but I'm confused as to whether I can get one when the property is mortgaged as isn't that effectively doubling the 'ownership' if I suddenly can't pay?

I don't want to go applying for credit blindly that I might not get because I don't understand the decisions they will go through.

I've got a secure job that pays exceptionally well, and repaying the debt isn't an issue in any way - we'll still be saving money. The issue is that we don't have the upfront capital to do the work.

Is this at all possible, or am I mad...

jonesMUFCforever

Repaying the debt is not an issue and having at least £25k unsecured debt do not go well together.
You could re mortgage either through your present lender or an alternative one for the extra money.
HOWEVER I urge you to look how you are in so much debt - there will come a day when the house of cards will be blown away.
Secured debt that cannot be repaid means homelessness.

boo_star

Yes, they would have the second bite of the cherry after your mortgage provider if it all went wrong.

I wouldn't recommend it, the interest rates are very high.

boo_star

jonesMUFCforever wrote: »

Repaying the debt is not an issue and having at least £25k unsecured debt do not go well together.
You could re mortgage either through your present lender or an alternative one for the extra money.
HOWEVER I urge you to look how you are in so much debt - there will come a day when the house of cards will be blown away.
Secured debt that cannot be repaid means homelessness.

Not automatically, no.

If you refuse to pay/ignore it for long enough that they default you then it is a possibility but fairly unlikely given most judges don't want to see people being homeless.

I still wouldn't do it because of interest rates.

CLAPTON

impossible to say without the facts

what are the debts and at what APR?

how much do you want to borrow?

what do you earn?

why don't you just remortgage?

Thrugelmir

boo_star wrote: »

If you refuse to pay/ignore it for long enough that they default you then it is a possibility but fairly unlikely given most judges don't want to see people being homeless.

They'll force repossession like any other lender. Sorry to tell you that judges uphold the law not pass personal judgement based on their opinion.

ohiwonder

So I clearly haven't made a few points obvious.

I have the funds to service the loan. In fact, I have the funds to service the loan payment several times, and still not have an issue.

I have an incredibly secure, high paying job. I'm in a strong solid industry and work for the market leader in a hugely profitable growth area of our business. Even with all that, I have insurances should I find myself unemployed unexpectedly. I have the skills and network that if that happened, I'm confident that I could find work in a very short period of time. We have an emergency fund for such a situation - which obviously I won't touch for this work.

The existing loan has -easily- put every penny we spent onto the house value - we've been told by those in the know. As soon as our mortgage deal period ends, our LTV is going to change substantially.

This is obsolutely not 'I'm broke, gizza loan m8' and is simply we need more capital to fund some purchases that we don't have the upfront cash for.

Back on topic.

I've looked into these loans more, and it appears that they are variable rate - in the main - which is obviously something that would need to be factored in.

We have re run the numbers and it looks like the best option is infact to get a secured loan against the car through the manufacturer, and then get a loan from the bank of family loan to cover the house work.

Thanks for the advice.

PeacefulWaters

Cars wear out.

Homes need maintaining.

Saving for the inevitable is the way forwards for next time.

boo_star wrote: »

most judges don't want to see people being homeless.

They will grant a possession order if they see a hopeless case. They will class "hopeless" as not being able to maintain even the mortgage payment when already in arrears.

jonesMUFCforever

I knew someone similar to OP - thought he was the bees knees and the business couldn't succeed without him. Then new managers came in and everybody at managerial level had to reapply for their jobs - bees kness is now working on a pig farm - mind you he got a nice redundancy payout.
Moral - never borrow more than you have got in some form of savings or it can go pear shaped.

Pixie5740

If you've got such an incredibly well paid job, why don't you have savings? Cars don't last forever so it's not like it was an unexpected expense.

This isn't 2007 when the television was awash with adverts from First Plus, Ocean Finance and Norton Finance. Secure loans are more difficult to get these days. You need a good credit history and a decent amount of equity in your property. The interest rates of a secured loan could well be higher than the interest rates on your unsecured debt.

Foxy-Stoat_3

ohiwonder wrote: »

I have the funds to service the loan. In fact, I have the funds to service the loan payment several times, and still not have an issue.

2 questions :

Q1. What is your current repayment amount?

Q2. What repayment amount do you think you will get offered from another lender that will secure the £25,000 of debt consolidation?

If the answer to Q2 is 3 times cheaper than Q1 then I would do nothing at all. Turning an unsecured loan over 7 years to a secured loan of 20+ years will end up costing you so much more, assuming you can get a debt consolidation loan for this amount over that term.

I don't think your numbers are going to ever stack up....assuming no interest:

£25,000 over 84 months (7 years) = £297.61
£25,000 over 240 months (20 years) = £104.16

If you can afford to overpay by "several times" assume more than 2 then £104.16 payment will be £312.48, still cheaper to keep the 7 year loan going.

The interest rate for a secured loan to consolidate debt is not going to be anywhere near the 2-4% mortgage rates currently available.