HSBC want to 'unsecure' business loan

Missymepops

Hi. Any help would be appreciated. I received a letter today regarding a secured term loan that I have with the HSBC. It began as a £70k loan just over two years ago secured on a property we purchased with the loan. The balance remaining is £65k. The letter states, and asks our permission by returning the signed documentation, "that any security for the term loan no longer includes xxxx the property address xxxxx.
Another part states "we no longer require xxxx address xxxxx as security, and if you agree, it will be released as security in respect of the term loan

Now to me that sounds like what once was a secured mortgage type loan is to become a £65k unsecured loan? Has anybody had any experience of this? Thanks in advance.

jonesMUFCforever

Does the bank hold a debenture or any other kind of lien on business assets?

From the bank's point of view it seems stupid to me - what is to stop you walking away from the debt? (Unless they hold your personal guarantees?)

Missymepops

They have no other guarantees whatsoever. There wasn't really a business so to speak in the first place. I wanted a property where part of it operated as an off licence therefore couldn't secure a mortgage. Hence the 'mortgage' with HSBC. We closed it down a few months later and now live in the property. Yes I could probably sell, keep the money and continue paying the loan. I won't though as I own two properties together and want to keep it that way. Just don't understand it. I since closed down the business accounts relating to the shop and pay the loan from my personal account.

System

Maybe they could charge a higher rate without the security?

Missymepops

No. The new terms other than them releasing the property remain the same, payments, interest, term, special conditions, general terms and conditions.
The letter also states ' the terms include changes to reflect the fact that the lending will no longer be made under a regulated mortgage contract subject to the financial conduct authorities mortgages and home finance and conduct of business rules as a result of release of xxx address xxx
This is baffling me. Seems like it's going to be a benefit to me but don't know why they would release security, unless they made a mistake in the first place. To be honest everyone turned us down for some reason or another so I was shocked when they gave us the mortgage in the first place. I told the business banking manager that we closed down the shop after 4 months.
All help is appreciated. Has anyone else come across this scenario before? Thanks in advance.

redpete

Maybe they've been caught out by another of the technicalities on the wording of something they sent you.

System

The terms may be the same now, but may be easier for them to change perhaps? Or maybe its so they can sell the loan on? Or maybe there is admin involved in continuing securitization

Missymepops

Baffled to say the least. Just rechecked, interest rate is exactly the same and linked to base rate. I have a copy of my original that they have sent me and can check the wording against the new proposal which is identical except the removal of the security.
I believe they may have been caught out somewhere in the original offer. The letter says it will change from when we sign and return the document so this isn't subject to us agreeing to any other type of security with them. Can anyone see any benefit in NOT agreeing? Thanks again.

boo_star

Missymepops wrote: »

Baffled to say the least. Just rechecked, interest rate is exactly the same and linked to base rate. I have a copy of my original that they have sent me and can check the wording against the new proposal which is identical except the removal of the security.
I believe they may have been caught out somewhere in the original offer. The letter says it will change from when we sign and return the document so this isn't subject to us agreeing to any other type of security with them. Can anyone see any benefit in NOT agreeing? Thanks again.

The only thing I can think of is that a >£25k unsecured loan would not be regulated under the Consumer Credit Act. But if that is why they're doing what they're doing and what their end game is as a result, I have no idea.