Guidance on secured loan

MarkSmith7

I need some guidance on getting a secured loan.

Due to a series of unfortunate events, I've racked up £70,000 in unsecured debt. The bleeding has now stopped meaning I am not expecting additional debt.

I am 34 years old, employed permenantly and earn £130,000 annually. I also have £400,000 equity in my property with £200,000 outstanding mortgage.

Would transferring this to a secured loan at much lower interest rate make sense? If I consolidated everything into a 20 year low interest loan, I will manage to save enough to pay it off within 3 years.

[Deleted User]

It's not generally a great idea to turn unsecured debt into secured.

Post on the DFW boards so you can get more rounded advice about all of your options.

swardean

I would try to avoid this, I unfortunately took one of these out with a similar intention to pay off quickly. Anyway, it didnt turn out that way, the unsecured debt crept up again and I was unable to pay it off quickly. This led me to having it for years and cost me a fortunate before I could eventually pay it off.

Even with good credit scoring you may be looking at about 9.9% APR. So on 70k that is a monthly payment of £650.

In three years you will have paid £23,400 but will still have a settlement figure of almost £67,000 !!

You seem on a decent salary and with an income almost double your debt, you may be able to service this debt without transferring to a secured loan. It may be a tighten your belt 4-5 years but if you can do this, I would do it.

Hope you find a solution, Good Luck Tom.

Ben8282

I can understand why this is tempting to you but, as said, replacing unsecured debt with secured debt is not generally considered a good idea.
If you believe that you can repay over 3 years, my suggestion would be to concentrate on paying the absolute maximum that you can in regards to anything at very high interest then, when the debt is less see about 0% cards to help lower the interest being charged.

Gaz83

Assuming this isn't a wind-up post, on an income of £130,000 what's to stop you living 'frugally' on £60,000 and paying it off in a year?

foxy-stoat

Just keep paying £2000 a month off the debt and get as much of it onto 0% or low interest balance transfer offers.

You probably could pay more into the debt as you take home £6500, less if you contribute to a pension but you could always give yourself a few months payment holidays, as your mortgage is £200,000 then you monthly payment shouldn't be more than £1000.

So unless you have expensive habits and lifestyle I would think you could pay £1000 more and clear your debt within 2 years without touching your equity.

foxy-stoat

Gaz83 wrote: »

Assuming this isn't a wind-up post, on an income of £130,000 what's to stop you living 'frugally' on £60,000 and paying it off in a year?

Probably because £130K is gross, tax and NI would cut over a third off that.

AThornley

I would have to agree with user Swardean, i too took out a secured loan to clear debt, biggest mistake i have ever done, mine was only 12k and i hoped a short term fix but unfortunately it did'nt turn out that way, i have now paid over 27k and about to settle it and still have to pay just shy of the original loan of 12k i feel sick with it i really do. try an IVA i have just come out of one it was a long slog but on the right path now.

djphig

Interest rates on secured loans start at 3.47% now, so forget that figure you've got in your head

foxy-stoat

AThornley wrote: »

I would have to agree with user Swardean, i too took out a secured loan to clear debt, biggest mistake i have ever done, mine was only 12k and i hoped a short term fix but unfortunately it did'nt turn out that way, i have now paid over 27k and about to settle it and still have to pay just shy of the original loan of 12k i feel sick with it i really do. try an IVA i have just come out of one it was a long slog but on the right path now.

Yeah but you signed up to an interest rate of 20%, the op's rate needs to be in the low single figures.

Thrugelmir

Gaz83 wrote: »

Assuming this isn't a wind-up post, on an income of £130,000 what's to stop you living 'frugally' on £60,000 and paying it off in a year?

Tax possibly?