Your lender has the right to begin repossession proceedings if you fall behind with your repayments or reach a point where you cannot pay back your secured loan.
If you encounter or anticipate any potential issues with your contractual obligations, it is essential that you contact your lender at the earliest possible stage and discuss the available options.
What is a Secured Loan?
The term ‘secured loan’ applies to any loan issued based on security (aka collateral). Secured loans can be issued as a second mortgage, or as a variety of specialist loans where various asset types and classifications can be used as security.
Lenders issue secured loans in accordance with the agreed value of the borrower’s assets, which are used to cover the costs of the loan in the event of non-payment. Secured loans are often taken out by homeowners and businesses to raise funds for property improvements, or to consolidate other debts and reduce outgoings.
Where sufficient security is provided to cover the costs of the loan, interest rates and overall borrowing costs can be kept to a minimum.
What Happens if I Fall into Arrears?
If you encounter difficulties along the way, it is essential to act as soon as possible. The following steps should be taken immediately to avoid repossession of your property:
- Contact your lender immediately
- Assess your income and outgoings
- Prioritise your repayment obligations
- Seek independent financial advice (if necessary)
- Organise an affordable repayment plan
By speaking with your lender, it may be possible to reach an agreement and an affordable repayment plan that works in the best interests of everyone.
When Will My Lender Take Court Action?
Most lenders approach repossession of property as a last resort. Formal court proceedings can be both time-consuming and expensive for lenders, who will typically attempt to avoid such drastic measures where possible.
Therefore, it is important to speak to your lender at the earliest possible opportunity, as doing so could prevent anydrastic action from being taken.
If court action is taken, you will be required to attend the repossession hearing. During which, the court will attempt to find a resolution.
It is possible that the court will issue an outright possession order against your property, which will give the lender the right to take ownership of your home by a specified date. You home will then be sold by the lender to generate the funds required to pay off your debts.
What Happens Next?
If the sale of your property generates enough money to cover your debt in full, no further action will be taken. If the funds generated are not sufficient to cover your outstanding debt, you will still be liable for the balance owed.