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What is a charging order?
Sometimes it becomes necessary to borrow money, in order to sustain or clear
existing debts. If you borrow money without collateral, this is termed an
‘unsecured loan’. An ‘unsecured loan’ is called as such because the loan
isn't secured against a home that might be owned by the borrower.
With a ‘secured loan’ the financer can press for the sale of the
borrower’s house if they fail to make the agreed payments or they default on
the loan. Unsecured loans should be preferred over secured loans by borrowers.
In a few cases the lender may try to acquire a charging order against the
house to guarantee their money. To get a charging order is not in the lender’s
interests as it can take a long period of time to do so. When it does arise and
the borrower fails to make payments repossession of property is often the result
after recourse to the law.
A charging order or ‘charge’ is not only applicable to a borrower’s
home. Other funds and also stocks or shares can be designated by a court as
payment for money owed, as well as an individual’s property. If a property is
sold while there is a charge against it all money owing should be paid back to
the loan company before the remainder can be paid out to the borrower.
The effect of the charge is that, in essence, it places the borrower behind
the lender in priority for payment of any money from the property sale. The
order of payment is usually as follows; first comes any outstanding cash owed on
a mortgage followed by the charging order, solicitor’s fees and any estate
agent fees. Stamp duty is also a crucial payment and so the homeowner can have
to handle sizeable financial loss when the remaining funds are eventually paid
out.
To get a charging order the lender must be given permission for one through
the law courts. Lenders are likely to only apply if agreed payments or a string
of payments are not made as this will be a breach of the terms in the contract.
For a charging order to be implemented a lender must have a hearing in a county
court.
The county court hearing will take into account various topics like; personal
circumstances of the borrower, how the charging order will impact other
creditors and additionally whether the borrower is disabled or suffers from a
health problem.
The borrower can request that the court come up with a payment plan that
takes into consideration their present and future financial situation, if the
court has determined to enforce the order. The debtor can make instalments from
their wages if they are working and the solution won’t influence their
employment.
Before picking out an unsecured loan it is recommended to consult one of the
various online comparison sites for the best deals. The Motley Fool offers a
dedicated Loan
Comparison Centre for potential borrowers to check for the best and worst of
the latest deals to be had. Amongst the most competitive presently available are
the Alliance & Leicester personal
loan and Moneyback
bank personal loan with APR rates of 6.5% and 6.3% respectively. An Alliance
& Leicester secured
loan also emerges as a good choice of Homeowner loan with an impressive 7.9%
APR.
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