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Loans and Charging Orders 101

To sustain payments on bills or debts, loans can be one of the few options. If you borrow money without collateral, this is termed an 'unsecured loan'. An 'unsecured loan' is referred to as such because the loan isn't secured against a property that might be owned by the borrower.

With a 'secured loan' the lender can press for the sale of the borrower's residence if they don't provide the agreed payments or they default on the loan. These loans are generally judged to be riskier and unsecured loans to be preferable.

It should be taken in to account that it is feasible for the lender to seek a charging order against the residence as collateral for their loan. This is a lengthy process for the lender and unusual to come across in practice, yet it does happen and the ramifications for the borrower, if they are unable to meet the required repayments, can be unpleasant, frequently ending in repossession.

It is not only property that a charging order or 'charge' can extend to. If the borrower has other funds or perhaps owns stocks and shares, a court can reclaim the owed sum through these funds as well as the property itself. If a property is sold while there is a charge against it all money owing has got to be paid back to the loan company before the remainder can be paid out to the borrower.

Effectively, the charge puts the borrower further back in the 'queue' with regard to receipt of funds for the sale of the property. If there is a mortgage outstanding, that will usually be paid first and foremost, then the charging order will be paid, then the solicitors fees and, if they are involved, any estate agent fees. Stamp duty is also an essential payment and so the homeowner can face considerable financial loss when the outstanding funds are finally paid out.

To get a charging order the loan company must be granted one through the law courts. They will only for the most part be applied for if the borrower has failed to make an agreed payment or sequence of payments within the terms of the agreed contract. Charging orders are enforced through hearings in a county court.

The county court will think about a number of things including; the debtor's individual situation, whether the enforcement of a charging order would inhibit other creditors from getting their debts or whether anyone affected by the enforcement has a disability or a major illness.

The borrower can request that the court construct a payment plan that takes into consideration their current and future financial situation, if the court has determined to enforce the order. The payments can be made directly from wages if the borrower is employed and the situation won't influence their employment.

If you are searching for a personal loan or unsecured loan it's a good idea to see an online loan comparison site such as the one offered by Motley Fool in their Loan comparison centre. At the time of writing two of the leading deals were the Alliance & Leicester personal loan offering an APR rate of 6.5% and Moneyback Bank personal loan offering an APR rate of 6.3%. Another good deal was the Asda Personal Loan at 7.9% APR.





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