Guidelines for Charging Order on Unsecured Lending

By: James Miller

First, prior to you read this article below, here are some helpful definitions. An unsecured loan - often called a personal loan - means that you are given a loan without having to provide security against it such as your home or car. Unsecured loans are suitable when you wish to take out a loan for a small sum of money. rates are likely to be a little higher than if you took it out as a secured loan. This is since, with a secured loan, the lender has greater certainty of recovering the funds in the event you default on payments.

An unsecured lender is a loan company that grants lending without insisting on some manner of security (for instance, your home or car). Unsecured loans may mean less time to set up nonetheless, will cost more in interest than with a secured loan. This is because the unsecured loan company is taking a greater risk because should you fail to pay loan instalments, the lender cannot confiscate your belongings to recoup their money.

An arrear is legal wording and is meant to refer to when you are late in payments on a credit agreement. A person is referred to as 'in arrear' from the time that their first payment is missed. This financial term is typically used when denoting over due payment of personal loans, credit cards, rent or mortgage as well as child support and taxes.

Lloyds TSB, Halifax Bank of Scotland, Nationwide, Northern Rock, Abbey, Alliance and Leicester, and Marks and Spencer Money, all said they use charging orders to turn unsecured debt into borrowing secured against the home.

There is a now a trend on issuing Charging Orders by major lenders when debts owed to them are not met. According to BBC Radio 4's Money Box programme in October 2005 the number of Charging Orders issued in county courts is running at 35,000 a year - that?s three times more than what it was five years ago.

A Charging Order put on your home means that when or if you sell the property, once the mortgage has been cleared, any proceeds will go to pay the outstanding debt.

As a Charging Order is a way of turning an unsecured debt into a secured debt, this in effect means that if you mess up on your credit card repayments, the result could be that your credit card provider can place an Order against your home.

While debts are debts and should be repaid, it is food for thought as to just how many of the major financial and High Street names are using it as a method of debt control.

Industry watchdogs say that the way loans and credit cards are being marketed should be changed so that they include mortgage-style warnings (eg. Your home may be at risk if you miss repayments).

The Financial Services Authority - the financial body for consumers - told the programme that it does not regulate unsecured debt, and therefore it is the remit of the Department of Trade and Industry (DTI) to ensure that consumers were treated fairly.

The National Debt Line is a national call-in helpline. It gives , without cost, impartial and confidential counsel to individuals on handling debt difficulties in the UK. Their helpline service can be used all week long and there is also an online website that offers lots of practical help and support on it. The National Debtline is an element of the Money Advice Trust (MAT), which is a registered charitable organisation. The Money Advice Trust supplies the public a strategic method to handling critical personal debt so they'll get control of their finances.

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