When does an Unsecured Loan become a Secured Loan?

[Onetotalk]

When does an Unsecured Loan become a Secured Loan? It strikes me that if you are a property owner that has hit hard times but your property is the cheapest form of keeping a roof over the head of your family, your are still fair game for the DCA's.

It appears that DCA's purchase credit card debts 'en-masse', they then trawl the Land Registry to see who is worth pursuing. If you own a property then the SD is sent to recover the whole amount. If you don’t then your debt remains unsecured (blood from a stone and all that).

Because the DCA’s only buy debts at 10p to 20p in the pound, the property owners offset the debts of the property renters. With this in mind, the probability of negotiating a short settlement (Full and Final), are remote as they need to maximise their return where they can.

Please discuss…..

[Bill-K]

Re: When does an Unsecured Loan become a Secured Loan?

That sounds about right to me. I think the way it is probably viewed is that a home owner has pledged his home as security for the debt, and he also enjoys the potential investment value of his home. I would also guess that he has enjoyed a lower interest rate than would be charged on an unsecured loan.

A tenant cannot pledge that which he doesn't own, and so his debt is unsecured. He probably doesn't have the ability to borrow as much as a home-owner, and probably pays a higher interest rate on his debt.

Two different deals, as I see it. But I don't think it is right that home-owners should subsidise tenants by being unable to negotiate their debts. The higher interest rates charged on unsecured debts should already account for the lower recovery rate of bad unsecured debts, IMO.

[labman]

Re: When does an Unsecured Loan become a Secured Loan?

I think you misread it Bill! lol

I think the point being made was that an unsecured debt is bought by a DCA. Once the DCA discovers that person owns property, they issue a Stat Demand, they then go to court once and get the go ahead to go back to court to get a charge against the person's house.

[Onetotalk]

Re: When does an Unsecured Loan become a Secured Loan?

Thanks Labman, I don't remember pledging my house on the credit card application all those years ago!

[Bill-K]

Re: When does an Unsecured Loan become a Secured Loan?

D'Oh !!! My apologies, guys.:crazy::whistle::bolt:

[dog after a bone]

Re: When does an Unsecured Loan become a Secured Loan?

you don't have to!
if a creditor knows you own/jointly own a home tey can apply for an interim charging order/restriction on the property as long as it meets with the courts criteria.e.g; they apply for a ccj and get it!
just be aware of this!!!
rich in hull[not legally trained]

[Bill-K]

Re: When does an Unsecured Loan become a Secured Loan?

I'm a LA tenant, but was a mortgagee years ago, and had to sell because of redundancy. That scares me, Rich - but I guess in principle it is correct. PROVIDED all the necessary formalities have been observed, then I'm aware that our possessions can be taken from us to repay a debt. But there ARE restrictions on this, aren't there ? Basic housing requirements are laid down with respect to furniture, car and other 'chattels.'

Surely, the roof over our heads must be one of those 'concessions' ???

[dog after a bone]

Re: When does an Unsecured Loan become a Secured Loan?

in the case of walk in possessions and the bailliffs,usually only none essential items can be levied/taken.the list of such items can be supprising even cars[if on lease/hpi,no]if your the sole owner yes.
your always wise to check on this through the internet ![what you call essential and what the bailiffs call essential may supprise you]
this process still has to go through court, and be proved that you owe the creditor.before this can happen .
again a judgement must have been made against you !
a warrant of execution[bailiffs] is seperate to an interim /charging order[you would have been informed by the land-reg] if this had been placed on your property,and the restriction types are in "forms"each giving slightly different instructions to be followed.
hope this is helpfull
rich..[not legally trained]
just trying to increase awareness of good fact finding from the available internet!

[Bill-K]

Re: When does an Unsecured Loan become a Secured Loan?

So - is the roof over one's head considered a non-essential item ? That seems to be the main question here. To me - it must surely be. But to the court - is it ? Or is it not ?

[labman]

Re: When does an Unsecured Loan become a Secured Loan?

Charging orders and bailiffs are two separate things.

The charging order is gained if you default on a CCJ. The creditor can then go to court, and if the court sees fit, they grant a "Forthwith Order." It is this which enables them to go back to court where a Charging Order may be granted. This simply means that the creditor has a charge against your property should you sell it.

As long as the debtor maintains payments as per the court order, their home is safe. If they default on the payments, then eventually they could be forced to sell the property. In this case the mortgage (as the first charge) is paid off, then any other charges in the order granted - there are unlikely to be more than three, the mortgage, possibly a secured loan (a loan secured by a charge on your property), then a loan which has been granted a charge as per the one above.

Bailiffs merely act on behalf of either the creditor or the court to try and collect any outstanding debt. If they fail to do this, then it is passed back for alternative enforcement.

They can seize goods by levying distress. Usually this is through a Walking Possession, where the bailiff owns the goods, but they are left in the property in the hope the debtor will pay before the goods have to be removed for sale at auction. What can and cannot be taken is complex, but in crude terms they have to leave you with essential living items to fulfil basic needs.

Hope this explains a bit.

[Onetotalk]

Re: When does an Unsecured Loan become a Secured Loan?

Hi all,

Interesting discussion, but Bill-K, my main point was why should the lender be able to differentiate between property owners and renters when they were clearly happy to accept both applications for Unsecured credit, on the same terms. furthermore, why in the case of DCA's should property owners be relentlessly chased to offset their assignments that have no assets. The OC knew the risk and accepted both owners and renters on the same terms?

[Bill-K]

Re: When does an Unsecured Loan become a Secured Loan?

Yes, as Labman pointed out, I mis-read the question, Ott, and it referred to unsecured credit in both cases. I agree, it seems unfair, but I guess when the credit is offered, the borrower is not asked for a list of their possessions - just evidence of their creditworthiness. If a borrower later defaults, and bailiffs are called in, then that is probably the only time the the lender becomes aware of what property the borrower owns. They may own 3 Mercs and a nice caravan, but not own their home. They may own an old Fiesta, but live in a very nice house.

So, at that point, the lender has to take whatever they can to settle the outstanding debt. My thinking is this: If the loan is unsecured, then the lender has the same legal entitlement to recover the debt in both the above cases. When the loan was advanced, both borrowers were not differentiated between, so the 'risk' taken by the lender in either case was the same.

Similarly, if one is to borrow money on an unsecured loan, one must bear in mind that one's assets could be seized if unable to pay it. The risk of losing 3 Mercs and a caravan is probably financially similar to losing a house - but the trauma is probably not so great.

Enter a third customer. This guy lives on a council estate, drives an old banger, and hoards everything in bin-bags (remember that program "A Life of Grime" ?) But he get his loan, as his property and lifestyle is again not looked into - just his credt record. He defaults, and the bailiffs get nothing.

It is only at this stage that the lender has any idea what chance it has of recovering the debt, and in the end, it just has to "take the rough with the smooth."

It doesn't seem fair on ther borrower, but similarly it's not fair on the lender, either. The only answer I can suggest is that potential borrowers have to supply a list of all their valuable possessions as a part of the loan application process. The council estate guy is refused the loan - or has to pay a higher interest rate. Either way, he is not then being 'subsidised' by the property owners and/or better-off borrowers.

[labman]

Re: When does an Unsecured Loan become a Secured Loan?

Excellent response Bill! Also, the amount being loaned is comparitively small, so the credit check is not that detailed (compared with say a mortgage application).

Turning unsecured debts into secured ones is actually frowned on by the judiciary, and happens far less than it used to. Try getting a charge against a £1000 loan and I think you'd find it very hard. However, if people become complacent in this knowledge and do not fight fees and charges applied to the account, a £1000 can rapidly turn into a £15000 loan, and then it would be fairly easy to get a charge.

The initial application does, in a way, seem discriminatory, but if you don't do it that way it is equally discriminatory the other way round.

Where householders benefit is the fact that if they are sure they can afford to repay the loan of say £5000 for a car, they can get a secured loan at a much better rate to a non householder. Thus, while they may appear to be discriminated against when things go wrong, they have the opportunity to benefit from better rates, and benefit from positive discrimination, when things go right and they are prepared to do things that way.

[Bill-K]

Re: When does an Unsecured Loan become a Secured Loan?

Cheers labman - nicely put yourself, too.

[winner12]

Re: When does an Unsecured Loan become a Secured Loan?

Hi
I would also say once you default on your debt stop paying etc and it goes to court the judge would be less likely to grant a CCJ if you have tried to pay what you can afford and the Charging Order is only granted once you have defaulted on the CCJ and after the bailiffs have been
All of the above would happen to a Tenant or a Home owner first
After all of the above have been exhausted then they would try to recoup using anything else you have left at this point if you are a tenant they may try to Bankrupt you or if a Home owner go for the Charging order or restriction
At this point which is worse Bankruptcy or Charging order ?
Just my view