Unsecured Loan? Think Again

[Injin]

http://business.timesonline.co.uk/tol/busi...icle3592024.ece

Creditors want your money, or your home

Banks are forcing an increasing number of homeowners to secure debts on personal loans and credit cards against their properties.

Figures from HM Courts Service show that there has been a sevenfold increase in the number of court orders to secure personal debt against property in the past six years. These have included applications from mainstream lenders such as Egg, Nationwide and NatWest.

The Courts Service received a total of 92,933 applications in 2006, compared with only 16,014 in 2000. In 2006 the courts approved 72 per cent of applications from lenders to secure customers' debts against their homes, up from 60 per cent in 2000.

Frances Walker, of the Consumer Credit Counselling Service (CCCS), says that the practice is growing among large lenders who are nervous about the level of unsecured personal debt on their books and want to reduce their risk profiles. She says: “Lenders like their money to be secured because it is safer, but they are effectively getting the higher interest rates of an unsecured loan, with the guarantees of secured lending.”

Oh dear.

[The Colour]

I can see the sun headline:

"I took out a credit card and lost me 'ouse"

Silly Bint

[Realistbear]

http://business.timesonline.co.uk/tol/busi...icle3592024.ece

Oh dear.

The new reality dawns as the Brown miracle years fade away.

Oh dear is right.

[Maggot_with_halitosis]

Fookin' hell, this is just getting better and better. I wonder if a 30% reduction in average house prices turns out to be an optimistic outcome?

[Guest An Bearin Bui]

Fookin' hell, this is just getting better and better. I wonder if a 30% reduction in average house prices turns out to be an optimistic outcome?

And THIS is happening in the USA - borrowers that took out a second mortgage / home equity loan on their property won't be protected by any planned government bail-out scheme so the BTL-MEW-morons are going to be hardest hit

This deluge of material for schadenfreude is too much...

[stuckmojo]

Excellent news. No more BTL chavs and plenty of Range Rovers sport at knockout price.

[redgenieuk]

It has always been quite common when people default on their debts or get behind to try and secure them I thought.

I think people who have debts should expect people to come collecting them and securing them in uncertain times, this expectatiom might help to lower the debt people elect to take on!

[Crashman Begins]

Its getting serious.

[newbie]

There's a lot of misconception in the UK about this. But if you have any debts (secured, unsecured, loans, taxes, damages claims, fines, etc) and no other means to pay them, but you do have a house, you can easily lose your house, and end up in jail (for contempt of court) if you resist getting moved on.

[Freeholder]

Excellent news. No more BTL chavs and plenty of Range Rovers sport at knockout price.

Fancy a Jag myself. This is going to be a great time for cash buyers with no debts.

[Injin]

The best thing about this (if you want a HPC) is that it's in everyones interest to get in first.

The obvious assumption is that if a credit card company isn't getting paid, then other bills aren't either. This will put an enormous pressure on that credit card company to get a first charge in onto the property, before the TV licence, gas company or whoever do.

It's going to be like a shark frenzy.

The second best thing about this is that people who only do unsecured loans won't give two monkeys if the house doesn't cover the mortgage, only that they get something back. They have no VI in keeping houseprices up, they just want their pound of flesh.

I really need me some jpegs of atom bombs and stuff like that.

[brassed off brit]

Just confirms to me that we can't take anything as read, when taking out a loan like this they they should by law have to tell you ..by the way its only unsecured till you don't pay.. bunch of corrupt feckin moneygrabbing, insolvent, debt peddling, who@remonging @stards.

AS you can tell I don't much care for banks....out of all this their will only be two winners, the banks and those who have as little to do with them as possible!

[Minos]

Fancy a Jag myself. This is going to be a great time for cash buyers with no debts.

Remember hell hath no fury like a chav scorned.

[gilf]

There's a lot of misconception in the UK about this. But if you have any debts (secured, unsecured, loans, taxes, damages claims, fines, etc) and no other means to pay them, but you do have a house, you can easily lose your house, and end up in jail (for contempt of court) if you resist getting moved on.

We had some discussion about this on here a few years back (wasn't much else to talk about at the time ), in essence you are correct there really isn't much difference between secured and unsecured when it comes to taking possession of a property, the big one is that if the debt is secured it doesn't take much to get the court to repossess, if it's unsecured they need to go through a long(ish) process but the end result is pretty much the same, you lose your house. I think the general level of debt in the past (i.e. much lower than now) has meant it wasn't really something the banks did too often.

When it comes to a 25 year old with no assets to speak of then yep they could in theory rack up big debts and walk away, however as a home owner it's a totally different matter. The increase in orders from the court is the significant part for me, might be in part the way people have got in to debt now generating less sympathy from the courts when the banks come knocking.

[Gone baby gone]

If I remember correctly Charlie the tramp pointed out that this could happen about a year ago. If you are in financial trouble due to unsecured debt but have other assets (i.e. your home), your creditors can get the court to secure the debt against those assets.

Oh dear!

[gilf]

If I remember correctly Charlie the tramp pointed out that this could happen about a year ago. If you are in financial trouble due to unsecured debt but have other assets (i.e. your home), your creditors can get the court to secure the debt against those assets.

Oh dear!

I think it's pretty much that case that they look at your assets, for most people the only real asset is the house.

Not going to happen if you owe £200 on a credit card, but as we all know there are many many people out there with 10's of thousands on credit cards and loans and thats a whole different matter.

[Freeholder]

Remember hell hath no fury like a chav scorned.

Before scorning a man you should walk a mile in his shoes. That way you have a long start and he has no shoes.

[Gone baby gone]

I think it's pretty much that case that they look at your assets, for most people the only real asset is the house.

Not going to happen if you owe £200 on a credit card, but as we all know there are many many people out there with 10's of thousands on credit cards and loans and thats a whole different matter.

Of course if you have no equity (or NE), you can just walk away, bankrupt.

[Bloo Loo]

Yes, they can charge a debt against your property, but they cant force you to sell it.

If you default against a secured debt, then they can force a sale.

In the first case the charge against the property is deducted from your proceeds of sale, so in effect, a debt charged to your home could effectively take you into negative equity.

[Sledgehead]

The best thing about this (if you want a HPC) is that it's in everyones interest to get in first.

The obvious assumption is that if a credit card company isn't getting paid, then other bills aren't either. This will put an enormous pressure on that credit card company to get a first charge in onto the property, before the TV licence, gas company or whoever do.

It's going to be like a shark frenzy.

The second best thing about this is that people who only do unsecured loans won't give two monkeys if the house doesn't cover the mortgage, only that they get something back. They have no VI in keeping houseprices up, they just want their pound of flesh.

I really need me some jpegs of atom bombs and stuff like that.

I'm interested in this aspect too.

I really need to better understand the mechanics. When banks assess the riskiness of loans, where in their current models do they allow for the possibility that the house might not be entirely the property of the purchaser? Need they worry? Presumably they have first call on any proceeds from a repo. But having said this, one imagines they repo when they can see their capital+interest under threat. Why then would a credit card company wait for such a moment, knowing that the realised funds will only pay off the mortgage lender?

Anyone know anything about this?

[piece of paper]

I really don't know why this surprises people. Another thread has posters similarly surprised that the £35K guarantee applied to the net deposit/borrowing from the banks.

The rules of the game are quite simple. If you owe money, the law will provide for you to pay it back if at all possible.

p-o-p

[lypsey]

These figures are refering to 2006 , when will 2007 figures be out?????????????????

[gilf]

Of course if you have no equity (or NE), you can just walk away, bankrupt.

Walk away as in walk away homeless you mean? Hardly a good situation is it. Like committing murder, kill somebody do 15 year and then walk away.

[Sledgehead]

I really don't know why this surprises people. Another thread has posters similarly surprised that the £35K guarantee applied to the net deposit/borrowing from the banks.

Who is surprised?

And whilst you are busy declaring your wisdom, how's about answering my question?

[Injin]

I'm interested in this aspect too.

I really need to better understand the mechanics. When banks assess the riskiness of loans, where in their current models do they allow for the possibility that the house might not be entirely the property of the purchaser? Need they worry? Presumably they have first call on any proceeds from a repo. But having said this, one imagines they repo when they can see their capital+interest under threat. Why then would a credit card company wait for such a moment, knowing that the realised funds will only pay off the mortgage lender?

Anyone know anything about this?

Two word for ya - falling market.

The quicker the secondary creditors can get that house on the market, the more chance of them getting something out of it. Secondary creditors actually rank higher than mortgage payments in most people's estimation once a charge has been out in place because if you don't pay a court order, you are going to jail. Call it a hierarchy of panic, or something.