Help with secured loan..........

ChrisJG_2

Hi

Im looking at a secured loan over 25 years to release some equity to settle debt that has come about by spending on the house etc.
I bought the house 10 months ago, and put down a hefty deposit of 130k on a 240k house.
Looking back now i realise i put to much down and should have kept some back to spend on doing things to the house etc, Anyway.
Im in a fixed rate deal for another 14 months, and my mortgage company cannot do anything as they have pulled most of there products given the current market.
So, next option is a secured loan and then in 14 months time i will just add the loan onto my new mortgage deal.
The amount borrowed with fees etc will work out at about 28,000.
The early repayment charge is the balance plus a months interest on the balance.
Im not taking any payment protection.
So, in a years time, will it just be the balance, as i dont imagine it would have gone down very much so lets say for arguments sake 27,000 plus a months interest, or would the balance be the total as in the original plus all the calculated interest which comes to 52k or close to it.
I have read a few other posts, where by people have taken out secured loans and settle a year or 2 later, and ended up paying like 5-8k more than they actually borrowed!!! im not sure how this has come about, and i want to make sure i avoid this.
The deal will save me about £400 a month, and short term thats not a bad deal, i cant go down the unsecured loan route, as i have bad credit history from 4 years ago, so as a short term fix i see this as a good solution, im just a bit worried im going to get stiched up like a kipper when i try and repay early and not sure what i should be looking for.

Cheers

regularsaver1

You say you have a bad credfit history - what do you mean by this? as you will be credit scored for the secured loan also

also, the secured loan company will need to get permission from your mortgage lender who hold the 1st charge on your property

in2deep_2

I to have considered the same thing as you for almost the same reasons.
But unfortunately its very very difficult to get decent advice about secured loans on here as most people are against them.
I have read somewhere about fixed rate secured loans, might be worth a look.

I hope someone on here will offer you sound practical advice.

ChrisJG_2

regularsaver1 wrote: »

You say you have a bad credfit history - what do you mean by this? as you will be credit scored for the secured loan also

also, the secured loan company will need to get permission from your mortgage lender who hold the 1st charge on your property

The credit score has passed already, i have a bankruptcy from 4 years ago which limits me with regards to good rates etc.
All im asking, is, will the early settlement figure be, what ive borrowed ie 28k minus what ive paid off the balance, for arguments sake 27k plus a months interest.
Or is the balance the whole lot including interest that is calculated over the 25 year period.
I think i know the answer, but i want some advice before i sign up!

CLAPTON

the reason that people are often hostile about secured loans is that they are not regulated by the CCA in the same way as unsecured loans and its often very difficult to understand all the fees and costs associated with the loan and in particular early settlement. Ask them for written illustrations of early settlement figures.

Rafter

Chris,

Two reasons people end up owing more than they borrowed:

1) Up front fees and legal costs of setting up the loan and charges against your property.

2) Rip off single premium payment protection insurance.

Particularly if you avoid the latter, you should be ok and given your credit history and the situation of your mortgage company you seem to have little option if you want to extend the period you pay your home improvement costs back over.

Good luck

R.

in2deep_2

Is the situation any better if you get a secured loan from a bank rather than carol vorderman.

PeteJones

CLAPTON wrote: »

the reason that people are often hostile about secured loans is that they are not regulated by the CCA in the same way as unsecured loans and its often very difficult to understand all the fees and costs associated with the loan and in particular early settlement. Ask them for written illustrations of early settlement figures.

You are wrong CLAPTON. Secured loans are covered by the CCA. Recent changes (earlier this year) made secured loans of over £25000 regulated, in the way that loans of under £25000 were before.

Early settlement of all secured loans is now capped at a maximum of one months interest, deferred by 1 month. If you give a months notice therefore, the most you can be charged is 1 months interest. No notice given, max of 2 months interest.

You will notice that all of the 'big' boys out there have started charging fees for arranging the loans. This is because the lenders do not pay anywhere near the commission levels for arranging a secured loan that used to be paid.

The problem area comes when you take PPI. First Plus for example have a very expensive PPI policy, granted it is OK for some people, and they do refund the premium after 5 years. The bad point is that most people do not keep a secured loan for the full period that they took it over, therefore when they come to pay it back (via a remortgage/moving house etc) they find that the cost of the PPI was added to their loan amount, and was interest bearing over the full period.

If you take a secured loan without PPI to 'repair' your credit, and after a period of time clear it by taking another loan with a lower rate (once your credit file looks a little better) it can actually be a good way to borrow.

Remember, in times like these, most unsecured lenders will reject around 97% of applicants. Secured lenders reject only around 35%....

ChrisJG_2

Thanks for the replys, got some sound advice there.
There are fees involved in setting up the loan, infact, i questioned them earlier today as i felt they were a little high, the loan amount is 25k then the broker fee is 2405 plus some other admin fee of 595.
So 3k in fees, but the way i see it, is if i continue to repay the credit cards, ill probably pay more than that in interest over the next 14 months?
And when i can get out of my fixed deal ill transfer the lot back into a mortgage.
The early redemption fee on my mortgage is nearly 8k! so its not worth doing that.
Oh and no im not taking PPI.