Contrary to popular belief, secured loan providers don’t want their customers to default on their repayment obligations. In fact, repossession of property is the worst-case scenario outcome they’ll typically do whatever they can to avoid.
The reason is that when a borrower defaults on their loan obligations, everybody loses. The customer ends up in a position where they could lose the assets used to secure the loan, while the lender may struggle to recoup losses. It’s in no way a beneficial outcome for anyone, which is why both parties should work together to ensure an amicable resolution.
Unfortunately, defaulting on a secured loan is anything but uncommon. For any number of reasons, borrowers fall in arrears and general difficulties with their repayment obligations on a daily basis. In all instances, it’s the action they take (or fail to take) when such problems occur that determines the outcome.
Seek Advice as Early as Possible
Ideally, professional advice should be sought at the earliest possible time. If you’ve even the slightest suspicion you may struggle with your loan repayments, it’s worth securing independent advice from a trusted provider. There are specialist services available in the UK for customers concerned about debt, which can be invaluable in such scenarios. The support of an independent financial adviser (AFA) or independent broker could also prove useful.
Be Honest with Your Lender
Perhaps even more importantly, you need to be honest with your lender. Rather than waiting until things hit crisis point, speak to your lenders the moment you anticipate repayment difficulties. In doing so, you’ll illustrate not only your genuine desire to fulfil your obligations, but also your openness to discussing alternative arrangements.
More often than not, your lender will be more than happy to discuss some kind of payment plan or even a temporary repayment break. Any kind of arrangement that sees the debt repaid in some form or another is preferable to non-payment.
Transfer of Property Ownership
In the event that the borrower simply cannot meet their repayment obligations, the lender will take complete legal ownership of the assets used to secure the loan in the first place. In most instances, this means taking possession of the borrower’s property.
Unfortunately, this doesn’t always mean that the debt will be quickly or completely settled. Instead, it can take considerable time for the lender to arrange and complete the sale of the property, during which time various additional costs may be incurred. At the time the property sells, the funds raised may not cover the cost of the loan, or any additional legal fees, valuation fees and general commercial fees incurred along the way. Even where transfer of property ownership occurs, therefore, the debtor may still be liable for supplementary costs and contributions.
Once again, the importance of carefully considering your options at the earliest possible stage cannot be overstated. Seek independent advice and speak to your lender directly – the faster you act, the easier it becomes to avoid unmitigated disaster.
Article by iConquer