Facing repossession is a horrible feeling, but is increasingly common in the current credit crunch. There are ways to delay or prevent repossession from happening no matter what financial situation exists. Carefully consider each solution as each one could potentially turn things around.
There is no greater priority debt than paying the mortgage. Don’t pay all the unsecured debts and focus any money available on making that payment. No judge in the land will allow repossession if the mortgage payment can be covered even if arrears exist.
Most other unsecured debts can be handled by a different debt solution strategy, such as a Debt Management Plan or Individual Voluntary Arrangement. These should be discussed with a debt counsellor.
Talk to The Lender To See If They Will Stop Repossession
If struggling to make repayments, talk to the lender and explain what has happened. It may be possible to delay or reduce payments or even switch to an interest-only mortgage. There is also a possibility that the arrears can be added to the outstanding mortgage.
Mortgage Protection Insurance To Cover The Mortgage
Check to see if a mortgage protection policy exists. Depending on the choice of policy, this could cover: unemployment, mortgage payments and long-term sickness. These types of cover usually last for 12 to 24 months and provide time to get things back under control.
Income Based Job Seekers Allowance – Claim For Mortgage Interest
If eligible for Income Support or Income Based Job Seekers Allowance, it may be able to get assistance with the payment of mortgage interest. For mortgages taken out prior to 1995 it is possible to get the interest paid on a mortgage of up to £100,000. If the mortgage was taken out after 1995, 39 weeks need to elapse before a claim can be submitted.
Sell and Rent Back to Stop Repossession In It’s Tracks
Provided that there is a minimum of 25% equity in the property it may be possible to arrange a sell and rent back. This involves selling the family home to a cash buyer and then renting it back at a more affordable rate. It is possible for very late repossession cases to be stopped and assistance is normally provided to achieve this objective.
Unlawful Loan Agreement
If sold an adverse credit mortgage, ask a solicitor to look at whether the loan agreement is legal. If it isn’t compensation or a complete write-off of the mortgage can happen. When a dispute is raised over the legality of a mortgage agreement the lender is unable to repossess a property until a legal outcome is reached.
No matter what happens, don’t simply hand the keys over to the lender as they will sell the house at auction for a very poor rate. If repossession is becoming increasingly likely, talk to a solicitor or debt advisor as a matter of urgency. Explore some of the options eluded to above as they could easily turn things around.
Consumers with a bad credit rating regularly take out a secured loan in order to perform debt consolidation. Those with good credit can opt for an unsecured loan provided their cumulative personal debt is under £15,000. Multiple sources of high APR credit card debt, personal loans and overdrafts can greatly complicate finances, resulting in higher monthly repayments to creditors and an increased likelihood of late payment charges. Debt consolidation loans help consumers to put all personal debt under one roof and make a single monthly repayment.
Debt Consolidation and Secured Loans
Whilst credit card debt, personal overdrafts and unsecured loans charge a high APR, they are all forms of unsecured debt. In the event of default, creditors have limited powers of collection and debtors have more options available to remedy the situation. Debt consolidation, particularly for those with a bad credit rating, involves turning unsecured debt into a secured loan on the family home. Whilst debt consolidation unarguably lowers household bills, it gives lenders collateral and greater powers. A secured loan means that a lender can repossess property to recover their money.
Debt Consolidation vs. Debt Solutions
Debt consolidation is a good idea for individuals with good credit and access to low APR unsecured loans. A bad credit rating may mean that the only way to perform debt consolidation is via a secured loan. A debt solution may result in a bad credit rating, but can make household bills more manageable. Debt solutions are available that can reduce monthly repayments. Those with serious debts over £15,000 could pursue a debt solution, such as an Individual Voluntary Arrangement (IVA) or personal bankruptcy. Less serious personal debts can be tackled with a debt management plan or Debt Relief Order (DRO).
Is a Credit Card Balance Transfer Better Than Debt Consolidation?
According to CreditAction.org, credit card debt in February 2009 was £53 billion and the average rate of interest was 17.92 per cent. Many consumers performing debt consolidation opt for a secured loan rather than a 0 per cent credit card balance transfer. Virgin credit card, for example, offers new customers a 0 per cent rate on transfers for a period of 15 months. It is then possible for those with a good credit rating to perform a further transfer at the end of the term. Consumers are able to reduce monthly repayments due to the absence of interest on credit card debt and avoid offering collateral to lenders.
Debt Consolidation and Existing Credit Agreements
Individuals performing debt consolidation regularly leave existing credit agreements open. This can actually serve to increase levels of personal debt as there is a huge temptation is to use the same credit card and personal overdrafts. If debt consolidation is opted for, close down existing credit agreements or further debt consolidation is the likely outcome.
Whilst debt consolidation can help to make monthly repayments and household bills more manageable, it isn’t always the right option. Think carefully prior to taking out a secured loan to consolidate debt as a debt solution may be more appropriate. Consumers with a good credit rating may be well served by performing debt consolidation with an unsecured loan as no collateral is provided.
Individuals that have signed-up to credit agreements prior to April 2007 should check to see whether an illegal credit card or unenforceable loan agreement is in place. This could lead to the debt being written-off and any adverse credit entries being removed.
Escalating financial difficulties mean that receiving help with debts is vital. Whilst there are a number of private companies offering assistance, a debtor can also turn to a non profit credit counseling service. The majority of unsecured debts (with the exception of student loan debt) can be negotiated with a debt relief program, such as unsecured debt settlement.
Help with Debts
Perhaps the greatest obstacle to becoming debt-free is knowledge and experience. Although budgeting is the most obvious way of achieving financial parity, a low interest debt consolidation loan could be of assistance as well. There are also several debt relief programs available, including unsecured debt settlement, Debt Management Programs and filing for chapter 7 bankruptcy.
Help with debts is especially important when expenditure exceeds income. Tackling the cause of personal debt is the only way that this problem can be alleviated. It is important to document all sources of income and expenditure so that potential savings can be quickly identified. Eliminate any unnecessary purchases. If budgeting doesn’t help to balance the books, a debt relief program or low interest debt consolidation loan could provide the answer.
Low Interest Debt Consolidation Loan
It may be possible to get a secured HELOC loan or an unsecured loan from Prosper.com for the purpose of consolidating debt. Whether a loan to consolidate debts is the right option will depend heavily upon an individual’s credit score. A poor credit rating is likely to mean that a debt relief program provides a better option. An equally important consideration is the type of debt as not all can be tackled with unsecured debt settlement.
Debt Management Program
Making debt repayments based upon the T&C’s of the credit agreement isn’t always possible. Instead, an intermediary will work with the debtor to establish how much can affordably be offered to creditors each month. After deducting a 15% management fee, contributions will be disseminated to creditors on a pro rata basis. Although there is no reduction to the principal (the amount owed), creditors may be prepared to freeze further interest and charges in order to help with debts.
Unsecured Debt Settlement
A professional negotiator will work with creditors to achieve a reduction to the principal of up to 50%. Any remaining debt is repaid over the next 12 to 36 months. The management fee is also 15%, but some debt settlement companies front-load fees (charge up-front). Only sign-up to a plan that takes their share each month in order to avoid future problems, such as creditor litigation.
Filing for Chapter 7 Bankruptcy
This is the best known source of help with debts. Whilst not suitable for everyone, it can allow someone with a high percentage of unsecured debt to become debt-free in just 4 to 6 months. The main negatives are that the matter is made public and it will show on a credit report for a period of 10 years. No debt relief program can be used to clear secured debt, student loans, current car loans, alimony or taxes.
The sooner that help with debt is sought, the less likely the problem will have chance to worsen. If improved budgeting doesn’t resolve financial difficulties, a low interest debt consolidation loan or debt relief program may provide the answer. Always seek assistance from a qualified debt counselor before proceeding.