Is a secured loan the answer?

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aivijo
aivijo Posts: 19 Forumite
I'll keep the story short, but following on from our wedding and maternity leave with twins plus home improvements, my husband and I have a few personal loans,credit cards and car loans between us accounting to c.£35k of debt. They were always affordable to us when we got them and although we never had loads of disposable income, we managed fine...until last year, my husband had a breakdown and now has depression so hasn't worked since. That's something that is slow work in progress but due to us now only living off my salary (i'm the breadwinner anyway), we're living penny to penny each month, and sometimes our in-laws have to help us a little financially too.

Our house has a lot of equity in it because we refurbished it when we bought it. I checked with our mortgage lender and they won't let us do a first charge against the property to borrow more money to pay off our debts. I want to consolidate around £35k worth which i calculated online so over 15yrs the rate is 7.8% and it would save us £500 pcm in outgoings. This would be a huge relief to us! It might be that if/when my husband works again we can look to remortgage it.

I understand that long term we might end up paying more back but based on our current position, we're hardly self sufficient and when we need things like car servicing or school trips paid for it ends up going on the credit card which isn't feasible long term.

Is a secured loan the sensible approach? Our house is worth at least £310k and the current balance on our mortgage is £176k so there's plenty of headroom. Selling the house and moving isn't an option as it'd make my husband's mental state even worse.

Also, my car is on PCP but my husbands is a loan. I thought we could pay his off and sell it so we just manage off one car for a while. However, if we borrowed £40k against the house instead I could probably hand back my car (on PCP) and look to change it for something much cheaper instead. I pay £380pcm on my car atm but they want £9k if I hand it back now!

Any friendly advise welcome :-)
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  • tempus_fugit
    tempus_fugit Posts: 1,189 Forumite
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    You say selling the house isn’t an option but if you secure a loan on your house and can’t pay it for any reason you may be forced to sell it. Have you considered that?
    Retired at age 56 after having "light bulb moment" due to reading MSE and its forums. Have been converted to the "budget to zero" concept and use YNAB for all monthly budgeting and long term goals.
  • Willing2Learn
    Willing2Learn Posts: 6,294 Forumite
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    Generally, it is a bad idea to convert unsecured debt into debt secured against your home as it can all go pear-shaped!!

    I recommend completing a Statement of Affairs (SOA) and then posting it up in a new thread on the Debt-Free Wannabe board. That way, we will see your financial circumstances in detail and can help you to explore all available options.
    I work within the voluntary sector, supporting vulnerable people to rebuild their lives.

    I love my job

    :smiley:
  • [Deleted User]
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    I would make sure your OH is getting all the benefits he should be. But would also advise against exchanging unsecured debt for secured.
  • aivijo
    aivijo Posts: 19 Forumite
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    You say selling the house isn’t an option but if you secure a loan on your house and can’t pay it for any reason you may be forced to sell it. Have you considered that?

    Yes I have, and I highly doubt it'll ever come to that as we haven't missed a payment for anything yet, I just want to find a way to make each month a bit more comfortable.
  • aivijo
    aivijo Posts: 19 Forumite
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    venison wrote: »
    I would make sure your OH is getting all the benefits he should be. But would also advise against exchanging unsecured debt for secured.

    He received jobseekers for the 6 months he was allowed to but as my salary is quite high we don't seem to be entitled for anything else. Can I ask why you would advise against it?
  • mjm3346
    mjm3346 Posts: 46,958 Forumite
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    aivijo wrote: »
    He received jobseekers for the 6 months he was allowed to but as my salary is quite high we don't seem to be entitled for anything else. Can I ask why you would advise against it?

    I should think for the same reason that others have already posted
    You say selling the house isn’t an option but if you secure a loan on your house and can’t pay it for any reason you may be forced to sell it. Have you considered that?
  • foxy-stoat
    foxy-stoat Posts: 6,879 Forumite
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    Have you actually been offered £35,000 @ 7.8% over 15 years?

    It may seem like you are saving £500 a month but you will be turning £35,000 worth of unsecured debt into £58,500 secured on your home.

    Put up balances, credit limits, interest rates, minimum payments of all your debts and we can look to save/reduce interest. Have you done the PPI reclaim thing yet? If not you may be able to take a chunk off what you owe if you hurry up.
  • mattvolatile
    mattvolatile Posts: 95 Forumite
    edited 31 July 2019 at 6:29PM
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    The general advice here is not to change unsecured debt for secured debt, but with that much headroom, I think a remortgage would be worthwhile (if you have no ERC) if you can get a low enough rate (2%) rather than that 7.8% on a secured loan. Speak to a broker.

    Definitely put up an SOA, as there are likely other options for you, but if it would drastically reduce your monthly outgoings and you're able to ensure you fix the overspending issues so you're not back in the same hole immediately, I am not as averse to the idea as the forum orthodoxy. It's a move I made (though my circumstances were very different to yours) and it's transformed my life.
  • fatbelly
    fatbelly Posts: 20,697 Forumite
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    aivijo wrote: »
    I'll keep the story short, but following on from our wedding and maternity leave with twins plus home improvements, my husband and I have a few personal loans,credit cards and car loans between us accounting to c.£35k of debt.

    You clearly have some surplus income. I'll have a look at your soa but it looks like a dmp (debt management plan) situation to me.
    aivijo wrote: »
    Also, my car is on PCP but my husbands is a loan. I thought we could pay his off and sell it so we just manage off one car for a while. However, if we borrowed £40k against the house instead I could probably hand back my car (on PCP) and look to change it for something much cheaper instead. I pay £380pcm on my car atm but they want £9k if I hand it back now!
    You can voluntarily terminate your pcp deal without charge at the halfway point. May be worth doing that as that's a high spend.

    The loan on your husband's car can just go into the dmp. If its a loan not HP/PCP then he owns it now and can sell it now. However the lender may well have put a marker on the hp register so a careful buyer might be put off.
  • DCFC79
    DCFC79 Posts: 40,598 Forumite
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    aivijo wrote: »
    Yes I have, and I highly doubt it'll ever come to that as we haven't missed a payment for anything yet, I just want to find a way to make each month a bit more comfortable.


    Not sure you can say that for definite.


    Look at your spending and cut back, post an soa on the dfw board.
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