Over £150,000 equity but can’t get a loan because of bad credit

GDB2222

I don't understand the comments here. I assume that the interest on the existing debts is very high. Would a consolidated debt, particularly a secured one, not have a much, much lower rate of interest?

Supposing the debts are £50k, and the interest rate currently is 25%, the interest alone is £12.5k pa. That's a big chunk of anyone's income. Dropping the interest rate to 5% on a secured basis, would save £10k pa.

The advice is to reduce outgoings, so why not start with interest payments?

ReadingTim

GDB2222 wrote: »

I don't understand the comments here. I assume that the interest on the existing debts is very high. Would a consolidated debt, particularly a secured one, not have a much, much lower rate of interest?

Supposing the debts are £50k, and the interest rate currently is 25%, the interest alone is £12.5k pa. That's a big chunk of anyone's income. Dropping the interest rate to 5% on a secured basis, would save £10k pa.

The advice is to reduce outgoings, so why not start with interest payments?

It's a lovely idea in theory, but in practise doesn't work out like that, mainly as it fails to address whatever caused the debt (and thus the high interest rates) in the first place. As a result, rather than consolidate debts, many end up doubling them, ending up in twice as deep as before, and with nothing left in reserve to bail them out.

Read the debtfree wannabe board if you don't believe me, but in short, you can't borrow your way out of debt.

GDB2222

ReadingTim wrote: »

It's a lovely idea in theory, but in practise doesn't work out like that, mainly as it fails to address whatever caused the debt (and thus the high interest rates) in the first place. As a result, rather than consolidate debts, many end up doubling them, ending up in twice as deep as before, and with nothing left in reserve to bail them out.

Read the debtfree wannabe board if you don't believe me, but in short, you can't borrow your way out of debt.

I tend to agree with you, but aren't you being a tad judgemental? The OP said that he was out of work for some time, due to a workplace accident. He says that since getting back to work he has struggled to make ends meet - he doesn't say that he failed.

foxy-stoat

Richard987 wrote: »

I just think it’s ridiculous that I can’t use my own asset to get myself back on my feet and start with a clean slate.

Any advice gratefully received.
Many thanks,
Richard

You can use your asset. Sell the house and buy a cheaper one until you are back on feet again. Taking money from your home to turn unsecured debt into secured debt is not a very good idea. You will thank yourself in a few years time.

Hope you have recovered ok.

Dobbibill

OP - you don't want to put your home at risk by getting a secured loan. In the long term if you were to have another incident whereby you couldn't work/made redundant etc unsecured lenders would go bottom of the list. This wouldn't be the case with a secured loan.

As already suggested head over to the DFW forum - post up a SOA and we'll have a look at things with fresh eyes.

Pixie5740

GDB2222 wrote: »

I don't understand the comments here. I assume that the interest on the existing debts is very high. Would a consolidated debt, particularly a secured one, not have a much, much lower rate of interest?

Supposing the debts are £50k, and the interest rate currently is 25%, the interest alone is £12.5k pa. That's a big chunk of anyone's income. Dropping the interest rate to 5% on a secured basis, would save £10k pa.

The advice is to reduce outgoings, so why not start with interest payments?

You're only comparing interest rates though what about the term of the debt. Yes a mortgage might have a lower rate but it's repaid over a much longer term so the OP could end up repaying a lot more interest in the long run.

The there's the issue of turning unsecured debt into secured debt. There are ways of dealing with unsecured debt if it becomes unmanageable such as a DMP or IVA which wouldn't risk the OP's home. Fall behind with mortgage payments and it's a different story.