PROPERTY NEWS & ADVICE
Short Introduction to Loans and Charging Orders
it becomes necessary to borrow money in order to keep up with
or pay off existing debts. When a consumer borrows money from
a financial institution, such as a bank or building society,
this is called an 'unsecured loan'. This is because the lender
has not secured the loan itself directly to the equity in
the borrower's home.
is lent as part of a 'secured loan', the financer has the
power to reclaim the cost of the loan by forcing the sale
of the property, in the event of default or inability to make
the required repayments. For consumers it is favourable to
get an unsecured loan over a secured loan for evident reasons.
instances the lender may try to get a charging order against
the house to guarantee their money. To get a charging order
is not in the lender’s interests as it can take a long
period of time to do so. When it does happen and the borrower
fails to make payments repossession of property is often the
outcome after recourse to the law.
is not the only collateral that charging order or a ‘charge’
can be applied to. Other funds and also stocks or shares can
be designated by a court as payment for money owed, as well
as an individual’s property. When a charge is laid against
a property, this means that, in the event of the sale of the
residence, the remaining monies have to be paid to the lender
before the remaining equity is paid to the borrower.
the charge puts the borrower further back in the 'queue' with
regard to receipt of money for the sale of the property. Payment
will first be made on any outstanding mortgage owed, then
the amount owed on the charging order followed by the solicitor’s
fees and then estate agent fees. Stamp duty is also a required
payment and so the homeowner can have to handle significant
financial loss when the remaining funds are finally received.
a charging order the lender must be granted one by the law
courts. Lenders tend to only apply if agreed payments or a
sequence of payments are not made as this will be a breach
of the terms in the contract. The enforcement of a charging
order can only be sanctioned through a hearing in a county
court will contemplate a number of things including; personal
situation of the borrower, how the charging order will influence
other creditors and additionally whether the borrower is disabled
or suffers from a health problem.
borrower can request that the court build a payment plan that
takes into account their current and future financial situation,
if the court has decided to enforce the order. The payments
can be made directly from wages if the borrower is employed
and the arrangement won’t affect their employment.
to taking out an unsecured loan it is recommended to check
one of the various online comparison sites for the best deals.
The Motley Fool offers a dedicated Loan Comparison Centre
for would-be borrowers to consult for the best and worst of
the most recent policies around. At the time of writing two
of the leading deals were the A&L personal loan offering
an APR rate of 6.5% and Moneyback Bank personal loan offering
an APR rate of 6.3%. Asda’s secured loans also represent
a good deal at 7.6% APR, based on £25,000 paid back
over 120 days.
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