Advice needed over short term loan for debts

Debt-Suck-You-Dry

Hi all,

I just wanted some advice on sorting out my finances.

Currently I have about £35k of unsecured debt. Plus £32k mortgage. I have two homes (one with my wife that we live in worth around 175k) and the other a family home that we have recently put up for sale (owned by myself and sibling worth around 400k).

I can earn about 1k a week (I'm self employed). The unsecured debt it costing me around £860 a month (£200 a week) and the mortgage is around £450 a month.

However I'm trying to cut back on the hours I do for my main occupation to set up another business that has more potential and is less taxing on my body. That should be running at a profit by March next year if I can get more time to dedicate to it.

All payments are up to date with no historic issues other than being at 75% utilisation of my CC limits according to Equifax (who score me at 'good' 420). It was about 440 at the beginning of the year but an operation that saw me out of action for several months and family issues meant I increased my CC borrowing.

Anyway once the 400k home is sold (split 50/50 with my sibling) I would be paying off all the unsecured debt. What I would like to do though is borrow enough to pay them off now and have enough money on top to dedicate all my time to building the new business (so say borrowing 45-50k).

What would my best options be do you think?

Can I get a relatively low interest flexible term secured loan? If so what am I looking for?

Any advice much appreciated.

[Deleted User]

It looks highly unlikely you'll get that kind of borrowing, if anything, due to your indebtedness compared to your income.

Although Equifax score you highly, the lenders don't care what they think, as they'll assess you on risk.

In any case, you would only be shifting one lot of debt to another lot, so it would be better to focus on overpaying your existing debt, starting with the highest rate.

Don't turn unsecured debt into secured.

Debt-Suck-You-Dry

"Although Equifax score you highly, the lenders don't care what they think, as they'll assess you on risk."

Surely there is no risk if it is secured against a property 4 times the value of the loan?

I'm not bothered about securing the debt as I have no intention of not paying it.

[Deleted User]

There's always a risk.

Lenders don't want to start repossessing to get paid. The want monthly repayments.

MovingForwards

The risk is if things don't work out as you planned with your work, you lose your home if you secure your debt on it.

Debt-Suck-You-Dry

"The risk is if things don't work out as you planned with your work, you lose your home if you secure your debt on it."

Thank you. However I have 200k equity in the property I'm selling. Plus if I wanted to I could increase my current earnings by putting more hours in. I'm not going to lose my home, I have enough fall back plans in place.

yksi

The reason people are advising you against a secured or consolidation loan is because typically, people who do this do not correct the reasons they got into debt in the first place and they continue the habits and spend into more credit card debt. Only this time, they can't get another loan to fix it and the debt becomes a real problem.

We all think that it won't happen to us but if you look around the DFW forum you will see hundreds of people who mention that they got into debt in the past and have done it again. Lenders are so sure that people repeat these patterns that they assess eligibility on such a loan with the assumption that you'll owe BOTH lots of debts. That is, they assume that you will, either immediately or later on, max yourself back out and need to repay both the consolidation loan (or equity, or whatever) plus also build up the credit card debt again. Their default assumption is that you'll keep on the same spending habits that got you into debt in the first place.

So in your case, they will take your existing debt repayment of £860 per month and then see whether you can afford to add, say, another £300 to that. If they aren't satisfied that you can afford to repay both amounts, you'll fail the affordability check. If they think that might make bills tough for you, they might perhaps offer it to you at 20% interest (representing that they see you as a borrowing risk).

So, options... your best option is to examine where your money is going, cut back on your spending, and throw every spare penny at the cc debt with the highest interest first, then as it's paid down, tackle the next-highest one. Yes, budgeting is boring, but it's reliable and it pays off. You had a really good income, and operations and family stuff can hit anyone, but the big question is, how did you get into so much debt and why didn't you have an emergency fund to deal with things? You don't have to answer to us, but it's a lotta debt and it's critical that you address the reasons it happened in the first place.

Option #2 is do a comparison search for interest-free balance transfer credit cards, this will allow you to transfer SOME of the balance and give you breathing space on SOME of the interest. You must make sure that you have the discipline not to keep spending on credit and you need to have a plan for paying back or transferring the balance once the interest-free period ends.

There is the option of extending your mortgage, and you might well need to pay application fees and pass affordability checks there (your recent operation and change of career might make that impossible or difficult, and your co-mortgagees would also need to be part of the process). It's also ill-advised due to the fact that over time, it will cost you more and take you longer to clear the debt.

"Equity release" products are another, where the lender gives you a chunk of cash in exchange for a charge over the property, but really and truly you don't want to do this, the debt collects interest like nobody's business and eats into your asset.

DCFC79

Debt-Suck-You-Dry wrote: »

"The risk is if things don't work out as you planned with your work, you lose your home if you secure your debt on it."

Thank you. However I have 200k equity in the property I'm selling. Plus if I wanted to I could increase my current earnings by putting more hours in. I'm not going to lose my home, I have enough fall back plans in place.

Just quote the post your replying too than copying a sentence or 2.


How recently have you put the property up for sale ?


Is the price similar to other properties of a similar style ( the ones that have sold) ?