Secured Debt
What is Secured Debt?
A secured debt can fall into two main categories:
The first involves the borrower putting forward an asset of theirs, usually their house or property, as collateral for the loan. This means that should the borrower no longer be able to pay the loan, the lender can ‘possess’ the property and use its sale as a way of paying the debt.
The second is often referred to as Hire Purchase, whereby the consumer takes out a loan to purchase goods e.g. a car. If there borrower can no longer pay the loan, then it is the item they purchased that can be ‘repossessed’.
Takes a look through our secured debt articles to find out more.
Secured Debt Examples?
Logbook Loan Debt
A logbook loan involves borrowing a sum of money secured against your car. By signing up to a logbook loan, you are essentially passing the ownership of your car to the lender in exchange for money. However, you are still allowed to use the car.
Mortgage & Rent Debt
Most people who own their own home, do so with a mortgage. This is a long-term loan, often over the course of 25-30 years, which allows people to borrow sums large enough to cover most of the costs of buying a house.
Secured Loan Debt
When lending money to consumers, some companies like to have the security of attaching the loan to your assets. This gives them the peace of mind that, if something went wrong, they would be able to recover some or all the money through the sale of your property.
Hire Purchase Debt
Hire Purchase (HP) is a type of finance agreement that is often used to purchase motor vehicles or household goods e.g. white goods and furniture. When purchasing vehicles or goods through an HP agreement, you won’t actually own the goods until the last payment has been made and the debt has been cleared.
Secured Debt FAQs
Can You Settle a Secured Loan?
If your financial situation improves significantly, then you may want to settle some or all of your debts earlier than planned. You should be able to do this, as long as your lender agrees.
Can You Write Off a Secured Loan?
We often get asked whether Secured Debt can be written off. The answer to this is NO. Or at least it is highly unlikely.
What Happens if I Don’t Pay a Secured Loan?
A secured loan is attached to your property, so if you are struggling to make your repayments, then your lender could apply to the courts to have your property repossessed to pay back the debt.