Over the last few years, more than 1 million people have accumulated unmanageable debts. These consumers have had very few opportunities/lenders willing to grant loans to consolidate their unsecured debts and found themselves entering into a debt management plan as a last resort, this to ease the financial burden and prevent aggressive debt collection practices by certain creditors.
The debt management plan provides a great deal of relief and is a valid tool for many, particularly tenants. But in many instances, home owners have found themselves worsening their financial position unnecessarily and basically wiping out their personal credit history, when other consolidation opportunities should have been offered by the debt firms to those with lots of equity in their home.
A recent positive trend via the moneybrain website is applications coming from clients who have been paying into a debt management plan month in month out for several years, who now find themselves in a better financial position and want to rebuild their credit history. For these people, the debt management plan has now served it?s purpose and they want to clear their debts in full and move back up the credit rating food chain.
Until recently lenders would not entertain any applicant who was in a debt management plan. This is completely understandable as the unsecured lenders in most instances where not going to get repaid in full, however we are pleased to report that a number of common sense lenders are now entertaining secured loan applications from those looking to settle their debt management plans, providing they have the income and security in the home to justify it.
As a guide, the applicants would have to have been paying their mortgage on time for at least twelve months, be in full time employment/self employment and be able to afford the loan repayments. All our lenders are extremely responsible and would only grant a loan if it was going to be placing the applicants in a better financial position.
Other points to consider;
- Minimum Property Valuation ?100,000.
- The clients mortgage and proposed loan must not exceed 70% of the property value. i.e. If the clients Mortgage is for ?50,000 the maximum loan available to clear the debts could be no more than ?20,000.
- A valid explanation as to why they entered into a debt management plan in the first place.
- Been in their current job for a minimum of twelve months.
- The credit history not worsened since they took out a debt management plan.
- Their debts had reduced in the debt management plan since it?s inception.
- Each case is different and will be underwritten by a human being, not a computer.
- Broker fees and lender fees will be charged, but only on completion and can be added to the loan. No upfront fees would be payable whatsoever, so please be aware as there are a number of rogue traders currently scamming people out of large up-front fees promising loans that applicants are never going to obtain..
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