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    • rfl
    • By rfl 13th Apr 18, 12:05 PM
    • 6Posts
    • 1Thanks
    Back again after 2 yrs away - debt query, secured loan or not?
    • #1
    • 13th Apr 18, 12:05 PM
    Back again after 2 yrs away - debt query, secured loan or not? 13th Apr 18 at 12:05 PM
    Hi all,

    Essay with details below but essentially - declined for unsecured loan and now considered a secured loan.

    Good or Bad idea?

    So a few years ago I really concentrated on my finances and got myself into a really good, healthy position personally. My husband is currently on a DMP which is being well managed.

    Fast forward to today and I've managed to get myself a big fat debt amount again. This time it's a combination of things, I gave my husband use of one of my 0 balance credit cards which was a mistake. I have slipped back into using my overdraft routinely and I have my own credit card that crept up. I can afford all the repayments (min plus a bit) and it is slowly reducing, I'm certainly not increasing any of the balances (my husband is yet to return my card but has assured me he will not use it anymore).

    Yesterday I applied for a personal loan as wanted to consolidate (feel free to give me a massive eye roll) and get some extra to redo our driveway but was rejected on grounds that my lending potential elsewhere. I owe less to my usual daily bank than elsewhere and totally get the risk and why they declined, it was a risk applying as I toyed with giving myself a few months to get the accounts looking healthier.

    I have spent a considerable amount of time going through my accounts over the last 6 months and I know where I'm slipping up and have made some changes to DD (have recouped over 150 per month already). I've also set up new cash accounts with other banks so I can transfer money according to budget topics. I've renewed my YNAB with the new version so I can use it on my phone.

    On paper I can afford the repayments for a loan. On paper my account will look significantly more healthy if I stick to my budget (which I can if I give it the attention it needs and the ynab app I'm hoping will keep me in line). My husband has suggested we look at a secured loan as we have a healthy amount of equity (currently 50%). I get the sense of this, its a quick solution that ticks all the boxes. Same term (5yrs) and potentially lower apr. But I'm hesitating as I know is not best practise and I worry about the 'what ifs' - what if we create more debt. We don't need to get into more as my budget is the most detailed I've ever done and I have accounted for emergency funds etc. But still, what if?

    If it was just debt consolidation I would wait but the funds for driveway would be really useful. We've had some drainage problems which has meant lots of digging on an already old, rubbish driveway. I'm confident that the amount we borrow could be recouped in house value terms.

    What would you do?
    Last edited by rfl; 13-04-2018 at 12:12 PM.
Page 1
    • sourcrates
    • By sourcrates 13th Apr 18, 12:17 PM
    • 15,531 Posts
    • 14,616 Thanks
    • #2
    • 13th Apr 18, 12:17 PM
    • #2
    • 13th Apr 18, 12:17 PM
    Secured loans are a complete and utter nightmare.

    They usually have a variable interest rate applied to them, which may look attractive to start with, but when the lender starts hiking up the rates, which they can, suddenly they seem a whole lot less of a good idea.

    Then there`s the issue of what if i end up in money trouble again ?

    This time your putting your house at more of a risk, i had a 20k secured loan once, from memory, the repayments started at around 200 a month, by the time the house was repossessed, the loan payment had almost doubled i believe.

    It was the interest that crippled me, i would not touch one now with a bargepole.
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    • #3
    • 13th Apr 18, 12:23 PM
    • #3
    • 13th Apr 18, 12:23 PM
    Hi rfl

    If nothing else, you need to be very cautious about consolidating using secured credit. Missing payments on a secured loan is going to put your home at risk of repossession.

    It sounds like you've taken some really positive steps to dealing with your finances, but having got on top of your debts previously you know how easy it is to fall into that trap again. You wouldn't want a secured loan and to run up the unsecured debts again.

    Many people on the forum can speak from personal experience on this. At the very least seek some independent financial advice before taking any further steps. I hope all goes well.

    We work as money advisers for National Debtline and have specific permission from MSE to post to try to help those in debt. Read more information on National Debtline in MSE's Debt Problems: What to do and where to get help guide. If you find you're struggling with debt and need further help try our online advice tool My Money Steps
    • rfl
    • By rfl 13th Apr 18, 12:34 PM
    • 6 Posts
    • 1 Thanks
    • #4
    • 13th Apr 18, 12:34 PM
    • #4
    • 13th Apr 18, 12:34 PM
    Thanks so much for your feedback, you are both echoing those doubts I have!

    I think I'll wait a few months and see how things are then. We can't get the driveway done now anyway as we need to make sure the repairs we've had actually fix the job.

    Re: interest on secured loan, I intended on getting a fixed rate for 5 years and having a 5 year term to avoid that very risk.
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