Secured loan to pay off DMP 26 June 2021 at 12:37PM in Loans 8 replies 283 views

Timbo40

Hi

I’ve got a DMP, it’s over 6 years old, I’ve paid off chunks as and when I can when I get a bonus from work or have spare cash, but I’ve still got 18k left on it. We want to move house in the next couple of years and use some of our equity to clear the DMP, but know that any decent lender won’t look at us with a current DMP. I really want to get rid of it ASAP, get straight/improve our credit for a couple of years, and then move.

Our loan to value is currently 47%, we have nearly 100k equity in the house. Contacted our lender (NatWest) to see if they would let us borrow extra on the mortgage to clear it off but they’re not interested.

So now I’m looking into secured loans. Are there any reputable ones out there who won’t rip us off? We’re ‘pre-approved’ for ocean finance apparently, but I’m concerned they might be a dodgy one!

Any advice welcome.

GeordieGeorge

What do you mean by “dodgy”? Consumer lending in the UK is highly regulated, and the terms and conditions that you sign at the start of the deal are what apply to you throughout, so it’s not as though any company can just change the rate or add charges that weren’t there in writing at the start.

Timbo40

GeordieGeorge said:

What do you mean by “dodgy”? Consumer lending in the UK is highly regulated, and the terms and conditions that you sign at the start of the deal are what apply to you throughout, so it’s not as though any company can just change the rate or add charges that weren’t there in writing at the start.

I just mean generally unscrupulous, things hidden away in small print, high rates after the initial fixed period, difficulty removing the charge when we sell etc?

molerat

Ocean Finance are a non prime broker not a lender and add a fee on top of the loan - they find you a loan between 5.1% and 89.9% which is pretty much why they can pre approve almost anyone and with a DMP you are not going to get anywhere near the bottom end - your are unlikely to get a loan that is not going to "rip you off".  A loan secured on property to pay off debt is rarely a good idea - "Your home is at risk if you fail to keep up with the payments" - so if another curve ball is thrown you could find yourself in a B&B !.  If you want to move and release some of the equity it would likely be best to speak to a specialist mortgage broker.

Thrugelmir

Timbo40 said:

GeordieGeorge said:

What do you mean by “dodgy”? Consumer lending in the UK is highly regulated, and the terms and conditions that you sign at the start of the deal are what apply to you throughout, so it’s not as though any company can just change the rate or add charges that weren’t there in writing at the start.

I just mean generally unscrupulous, things hidden away in small print, high rates after the initial fixed period, difficulty removing the charge when we sell etc?

Secured lending is highly regulated.  Always read the small print/ask questions before you purchase anything. Might well be cheaper to focus on clearing the DMP yourselves (i.e. interest free). Then approaching a mortgage broker that specialises in the adverse credit market. 

ThisnotThat

If you're on a DMP presumably your debts have defaulted so you're not paying interest?  I'm not sure why you'd want to turn interest-free debt into what will almost certainly be high-interest rate debt, secured on your home to boot.

Having a large loan is going to have a significant impact on affordability for the mortgage as well.

sourcrates

Don`t do it, interest rates tend to be high, and variable, miss a payment, the charges alone can add up to £50 or more.

You should look at other, more inventive ways to clear the debt, for example, are all your debts enforceable, have you submitted CCA requests ?

Are all your accounts defaulted and sold on ?

Debt purchasing companies are much more open to settlement deals, anywhere between 20 & 75% discount can be achieved if your are persistent and keep at it.

Borrowing to pay off existing debt, especially secured borrowing, is just a folly in most cases, and can lead to you losing the house if life throws you another curve ball, as another poster pointed out above.

Basically its a very bad idea, when other, more sensible options are available to you.

DCFC79

As your in a dmp your not meant to take out more credit, have you spoken to who your dmp is with, maybe they will lay things out for you.  

sourcrates

DCFC79 said:

As your in a dmp your not meant to take out more credit, have you spoken to who your dmp is with, maybe they will lay things out for you.  

That is technically true, but DMP`s are not regulated so there is no tangible penalty if they did.

However, its a really bad idea anyway.