So having finally got to the stage where debts have got out of control with a combination of loans and credit cards with hi % rates (15% – 30%). I have contacted a debt consolidation company who are happy to offer a secured loan at a rate of 7.1% over a period of 14 years. I will be looking to pay it off much quicker so I don’t have this hanging around for too long.

This will reduce my monthly debts payments from £800 – £307 so hopefully I can start to save and overpay. I have currently just fixed my mortgage for ten years at 2.7% with Leeds so have 10 years of stable payments there and will definitely get this loan paid off well in advance.

I know that secured loans/second charge mortgages are general looked on in a dangerous manner but if I can get more security , build my credit rating back up then hopefully I can clear this off much earlier and switch to a better deal that is not secured .

Thoughts as always appreciated.

Depends if the Consolidation Commpany are legit or not.

Some are dodgy scammers, I think they’re called Step Change, they were a chairty who could help out and knew all the scams to avoid.

Might be worth speaking to them as they will know the ups and downs of deals.

What is it secured on? If it’s your house, why not increase your mortgage?

You are looking to pay back £51,000 over 14 years? How much are the “Debt Consolidation” co. asking for this service?

Might be best to contact citizens advice bureau who can give you the number for a debt help Charity. They can give an unbiased view of your best option of getting out of debt.

I don’t know if it’s the best option (I’m not a financial adviser) but if you had equity in the house couldn’t you have borrowed extra to pay off the debt and then overpaid the mortgage to avoid the 7% loan?

Otherwise what you’ve done sounds sensible to me

any reason you’ve gone 2nd charge? have you approached your current mortgage lender? they would likley offer you a better rate than that but some mortgage companies no longer offer debt con. Give em a ring if you haven’t already.

Firstly, you’re asking in the wrong place. Whilst STW is a wonderful ‘community’ it’s not a financial planning site, you may get great advice, you might get terrible advice – but there won’t be enough clued up people to help you decide which is which.

Have a look as Money Saving Expert, or if you want more professional advice speak to MAS https http://www.moneyadviceservice.org.uk, step change as above are also good, but I don’t think they’re quite as good as MAS.

Be very careful who you talk to, there are lots and lots of sits / companies that look and act like charities or government bodies and are actually credit brokers and loan companies – not good ones either.

As for your plan, a debt consolidation loan can be a good idea, but ‘borrowing your way out of debt’ is rarely a great one, that interest rate is still very high for such a long term on a secured basis and do you know if it’s fixed?

I guess the mortgage thing is done now, but I’m assuming that as you’ve just be offered a secured loan, you have sufficient equity in your home for the loan – it might have been cheaper to add it to the mortgage.

Anyway, don’t listen to me – speak to MAS and MSE, don’t be shocked if the ‘bankruptcy’ word gets mentioned. I’ve worked out how much we’re talking about, it’s a big number – bankruptcy isn’t easy, but really what does it mean? You can’t borrow any money for a couple of years? DO you really want to?

Past the edit time for previous post.

These people used to be good for advice. Knew someone working for them – now retired.

https://www.stepchange.org/

Speak to them to see if the deal is good or not.

7% over 14 years? I wouldn’t. Especially secured on my home!
Speak to your mortgage co. If they were willing to give you a new deal while you have other debts they may be willing to add them to your mortgage.
As P-Jay says, get some good independent advice.
Don’t put your home at risk.

I have approached the mortgage company and they cant help me out as the amount i need is over the 4.5 times salary.
I`ve had a look through the money saving expert website and although they suggest that secured loans aren’t advised if it helps reduce the percentage you pay back then its not a bad option.

A few questions…

• If you can pay it off quicker why not take it over a shorter period?

• If you are going for a longer period to get the payments as low as possible this suggest you may end up spending the monthly saving rather than cutting the debt.

• Are there any early payment penalties on the secured loan?

• What circumstances led to the debt? Once you’ve consolidated can you be 100% sure you won’t be back in the same position in a few years?

Mooly – Member

I have approached the mortgage company and they cant help me out as the amount i need is over the 4.5 times salary.
I`ve had a look through the money saving expert website and although they suggest that secured loans aren’t advised if it helps reduce the percentage you pay back then its not a bad option.

Have a quick word with Money Advice Service, honeslty it’s a huge decision and whilst reducing outgoings by £500 a month seems a great solution, there might be an even better one avilable to you.

Make sure it’s fixed rate too – we’re at a base of .25% now, 14 years is a huge amount of time – anything could happen.

7% secured sounds expensive to me but I don’t know the market. If you default they take your house so to my untrained eye seems a bit much.

What about peer to peer, any takers on there.

7% compounds to a doubling of debt in 10 years.

Sorry I can’t help but seek impartial advice, isn’t someone on here from Christians against debt.

7% compounds to a doubling of debt in 10 years.

That’s what I was going to say. 7% doesn’t sound much, but you’ll be paying off the debt twice over.

Over that time you’ll be paying roughly £19,000 in interest alone. (BTW, you might want to ask STW to edit your original post slightly, as with the info you’ve provided it’s possible to work out what your debt is).

I’d get on the debt free wannabe section if money saving expert and ask for advice there

Also have a close read of this

http://www.moneysavingexpert.com/loans/secured-loans

Before signing anything check the terms for the circumstances under which they can force you to sell, whether the interest rate is fixed (and if the 7% is Apr or flat) etc

I’d exhaust all other options before getting a second charge on my home.

Can you extend the mortgage up to 4.5 income?

From what you have said need to know what happens with over payments on the 7% loan. Are they immediately taken from the debt the moment you pay them? Does this then reduce your payments or the time you repay for.

Where a charity or expert might help is to go through every dept and see if anything can be done to make that more reasonable (doa deal with the lender). Also every other loan you currently have needs to be checked for early repayment penalties

Well done for facing upto the problem but get expert advice, even if you have to pay for it

Oh and have you filled in one of these to compare

http://www.moneysupermarket.com/loans/

Ouch.

By securing unsecured debts against your home, you are transferring the default risk from your credit card companies to yourself and whoever else lives in your house.

If you’re struggling to meet minimum payments, you can enter into an “arrangement to pay” with your creditors in which they stop interest (yes, stop, as in 0%) and accept lower payments until the balances are paid, or your income increases.

Yes, your credit file will be screwed for six years (the length of time any defaults will show on your credit file), and no, that does not matter half as much as people think it does. You will learn to live a lifestyle without using credit. So you won’t need it.

National Debtline and Stepchange are two charities that can make this arrangement to pay with your creditors. They’ll administer it for you, and it’s free. Don’t go with a fee-charging company.

Please, please don’t turn unsecured borrowing into a debt secured against your home. Please.

I used to sell these things and I really wouldn’t if you can find another way. Obviously I don’t know who the lender is but I’ve seen so many hike the interest rate over the term and hook their customers back in on a “top up” or whatever they decide to call it with a better rate years down the line(probably not better than the original rate mind). Second’s are rarely fixed rate ime. 7% isn’t a bad rate actually. Nasty business imo. At least you don’t get the ppi hard sell these days I suppose.

Another vote for step change advice here also. Good luck btw

7% is too high, last I looked Tesco were doing 4% home improvement loans.

So have been in touch with Step change (debt charity)and they are completely sorting me out with a Debt management plan and contacting all the creditors and distributing what I have available to offer them after my essential costs are covered on my budget.
In short it means that my outgoings on debts have gone from £800 to £200 and month. Feel so much better about this as it means my debts aren’t secured and I will have to get serious about budgeting and living within my means.
It will screw my Credit rating completely but its not in good shape at the moment anyway.

In short it means that my outgoings on debts have gone from £800 to £200 and month. Feel so much better about this as it means my debts aren’t secured and I will have to get serious about budgeting and living within my means.

🙂

Congratulations!

Well done Mooly. The sense of relief when you get things sorted is immense. I had to go bankrupt nearly 8 years ago now due to family business going under and was suicidal in the years running up to it due to the stress.

Your credit score will recover over time – mine is now excellent (better than it’s ever been).

Mooly – Member

So have been in touch with Step change (debt charity)and they are completely sorting me out with a Debt management plan and contacting all the creditors and distributing what I have available to offer them after my essential costs are covered on my budget.
In short it means that my outgoings on debts have gone from £800 to £200 and month. Feel so much better about this as it means my debts aren’t secured and I will have to get serious about budgeting and living within my means.
It will screw my Credit rating completely but its not in good shape at the moment anyway.

I’m really pleased for your Mooly, as you say your credit worthiness is damaged for a while, but it doesn’s sound like you should be borrowing at the moment anyway – plus 6 years and it’s like it never happened – not 14.

It will screw my Credit rating completely

Good. You don’t need any more credit.

You’re on the right track, stick with the paln.

It sounds as though things have taken a turn for the better.

By my crude calculations, the original proposal of £307 per month for 14 years (168 months) would have seen you pay £51k – on what we can assume would have been an original loan of c.£26k.

That means you would have been paying back double what you owe.

While more complicated in the short term, it sounds as if your new course of action could cost a lot less than £25k in interest payments.

Hopefully there will be no interest paid as Step change manage the accounts and deal with the creditors.
Cant recommend them highly enough at this stage but will see how it pans out as they contact the creditors etc.
Its still going to take me a long time to clear the debts (10 years-ish) but is really about time I started to control my spending habits.

Thanks for getting back to us and glad to here you have a solution

Out of interest did asking on here help?

So have been in touch with Step change (debt charity)and they are completely sorting me out with a Debt management plan and contacting all the creditors and distributing what I have available to offer them after my essential costs are covered on my budget.
In short it means that my outgoings on debts have gone from £800 to £200 and month. Feel so much better about this as it means my debts aren’t secured and I will have to get serious about budgeting and living within my means.
It will screw my Credit rating completely but its not in good shape at the moment anyway.

Well done that man!

it will work but only if you have changed and got the discipline to budget and not take further loans.

Don’t worry too much about your credit rating. Defaults / CVAs only seem to matter for mortgage applications and other loans and secured debts tend to be given out regardless, you just get screwed on the interest rates.

Don’t worry too much about your credit rating. Defaults / CVAs only seem to matter for mortgage applications and other loans and secured debts tend to be given out regardless, you just get screwed on the interest rate

Are you sure? An IVA is like a light-bankruptcy, it’s an admission that someone has over-borrowed (and conversely the creditors have over-lent) and represents a group repayment agreement that’s fair to both sides meaning someone pays what they can afford to pay, no more, no less.

One of the first questions on any new finance applicantion is “have you been made bankrupt or entered into an IVA agreement in the last 5 years”.

Lending to someone who’s in a IVA is admitting to ignoring affordability rules, you might as well call it a gift because you’ll never be able to enforce repayment legally.

You’d be surprised… some lenders are absolutely desperate and will override / ignore / fudge credit checks to get the application approved. It’s not necessarily the lenders but the people on commission to sell the loan.

Eavesdropping in CPW last year was enlightening; they ended up using the details of the guy’s flat mate without his knowledge to pass the credit check. This same method goes right up to biggish loans like car finance etc.

i’m with stepchange just started, I’m trying to pay off as much as possible, should be clear in 2019, so far so good.

Amptill – Not sure if advice on here helped but did cause me to put the brakes on agreeing to a secured loan.
It isn’t an IVA as such as the charity take on the responsibility which is great.
I`m actually looking forward to penny pinching and budgeting and trying to be a lot more disciplined.
Hopefully it will be easier if you start from a point outside of debt.

I’d say it helped then

Some people seem to think forums are poor place to ask specific technical questions

But some times without asking on here you don’t even know who to turn to