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Small debts costing people their homes


7/22/2009 2:16:29 PM
Lenders can apply to the court and ask them to issue a charging order against customers who are in difficulty.  This effectively secures the debt against the customer’s property.  The Citizens Advice Bureau reports a sharp rise in lenders going down this route.

It is very worrying that it could be technically possible for a relatively small debt to cause a forced property sale.  There is no minimum amount at which the debts can be subject to a charging order.  

This news will not be welcomed by customers who took out unsecured loans at a higher interest rate, to avoid any risk to their homes.

Charging Orders

A charging order transforms an unsecured debt into a secured debt.  

If you are behind on your repayments and fall into difficulty then the lender can apply to the courts for an order of sale.  They can force you to sell your house in order for them to get their money you owe them.

Failing to keep up your payments on an unsecured loan could kick off the process which eventually sees you lose your home.  

Should you secure your loan?

There is no complete way of securing your property.  Despite this lenders still feel that there is less risk to them associated with secured loans.  From a customers point of view a secured loan is obtained quicker and the interest rates are lower and the loan can be taken out over a longer period of time.

The amount of money consumers can borrow for an unsecured loan is capped at £25,000, although many lenders do not like to offer over £10,000.  

It is still easier for a lender to force you to sell your home, if you do not keep up with your repayments, if you have a secured loan.  It is more complicated for them to force a sale on unsecured loans, although as explained above it is still possible.  

The best advice is to not borrow more than you can afford to pay back.




Written by Sam Peppercorn of Loan Machine Secured Loans
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT. LOANS SECURED ON YOUR HOME.