Credit Card Debt - Take Care

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Not everyone realizes that personal loans and credit card debts could lead to repossession of their homes - even though the mortgage repayments are right up to date.

 

The Financial Services Authority, or FSA, have expressed their concerns and issued a warning to lenders regarding their attitude towards borrowers who have financial difficulties and fall behind with their repayments. Building societies and banks are also apprehensive about the number of non-mortgage loans which trigger repossessions. One northern building society reports that more than a quarter of all its repossessions were in fact triggered by lenders other than themselves.

 

Some more aggressive lenders are making use of a lesser known law which enables them to turn unsecured borrowing into a debt on a person's home. People who took out, for example, a loan to consolidate a number of debts are running into difficulties.

 

It's possible that the lender can make an application to the courts for what is called a "charging order" which effectively turns the debts into a secured loan, secured against your home.

 

These loans are then more realistically a mortgage and the money owing is recorded with the Land Registry as a "second charge" on your home. If your home is then repossessed, the lender of that loan will be second in line for payment, after your main mortgage lender has retrieved what is owing to them.

 

There are concerns that when property prices take a tumble, there won't be sufficient money left in the amount achieved from the sale to repay the second lender. As they are nervous about this, these lenders are very quick to apply to the courts for a judgement if you fall behind with payments. There is nothing your main mortgage lender can do about this.

 

The traditional advice when taking out a secured loan was that you should be aware that if you fall behind with payments, you could ultimately lose your property. This warning was not issued with unsecured loans, however, and because of this lack of risk, they carried a higher rate of interest. If lenders then turn them into secured loans the situation alters totally.

 

For anyone who finds themselves in this position, the first thing to do is to look for some sound advice from someone experienced in the situation. One such source is the debt charity Credit Action, whose spokesman is reported as saying "These arrears are a ticking time bomb. There's no getting away from the fact that repossessions will continue to soar."

 

You could possibly receive a notice of possession, notice of sale or charging order. If you do it's possible to appeal against it by carefully presenting a full statement of your finances and clearly showing how you plan to handle the financial situation with regards to repaying the loan.

 

You should take this very seriously. The fact is that if you go to an appeal having done all your homework and showing that you are not treating things in a flippant manner, but are conscientiously trying to work things out, then all may not be lost. Even if a repossession order is issued, a great many are suspended by the courts, to allow people more time to get their finances into shape.

 

If you're struggling, don't bury your head in the sand. Seek some advice. Talk to your lender. Don't ignore it.

 

Article Source: http://www.theukarticledirectory.co.uk