Help. We urgently need to raise further finance for boiler repairs & other urgent items. We have tried to arrange a 'further loan' (secured) with our mortgage provider (Alliance & Leicester) but this has been refused on the grounds that we are 'over comitted'. Now, I can't really argue with this, & need advice...

Basically, our mortgage is £92 K,

'2nd Charge (Picture Finance , now out of business so can't help further) £50K

House worth £275K. Various credit cards (about 10 between us) amounting to approx a further 40 - £50K !!!

Our joint income after tax is approx £4096 per month, we have never defaulted on any of the mortgages, loans or credit cards, although I personally must confess to the odd late payment (very rarely) due to illness or being away at the time.

So basically we have about £75K ish equity. We do have lots of debts but we are trying not to use the cards much now.

We were refused by A&L for secured (extra mortgage), so I immediatly tried for an unsecured loan which we haven't had the result of yet. Was this an error, as two credit searches in a short period will have been recorded? What do you suggest? We believe we CAN afford loan repayments & are not using the cards now so these will be coming down gradually. HELP !!!

I don't think you're on your own in this situation.

Immediately going for an unsecured loan WAS an error, unless you had a massive credit score. Many finance companies don't like to see searches done in the 30 days before you apply.

I would seriously keep clear of sub-prime lenders. They may accept your application regardless of your score because you do have some equity, but it'll cost the earth. My advice would be to visit your local finance broker. They will be looking at a wide range of lenders and will hopefully find you something suitable. Ask them for quotes in the first instance, and be completely straightforward with your circumstances and recent searches.

Rob

If I were underwriting your loan I'd be less concerned about your net assets of £75K than about your income position.

The equity in your house look quite health if you only have approx £140K of secured lending against a valuation of £275K; however, in a very 'gut instinct' kind of way I'd be worried about how solid a valuation that is if you're having to borrow for essential repairs. In the current housing market the reliability of valuations depends a lot on the condition of the house. Borrowing for repairs is not a good sign in that regard.

Over-commmitted means what it says. If you're only paying back 2-3% of those credit card balances every month you're still paying 2.5K per month out of a total income of £4K. That means that your credit reports must show low repayments and high balances that aren't shifting - that's going to get alarm balances ringing with an underwriter in a troubled market. That suggests that after your mortgage and council tax you haven't got a lot of cash to play with, which is where we came in, since you're trying to borrow to pay for running repairs on your home. If that sounds harsh I'll immediately apologise, but that's how the underwriter is going to see it, and, I suspect, how the underwriter for the unsecured loan will see it as well.

In a bull market debt consolidation would have been an option; it might be a good exercise now to do an income and outgoings summary before you take on any more lending, and work out how you're going to get through the next twelve months with the debts you've got...

Yes, I agree it doesn't look good having to borrow for essential repairs, but the simple fact is that we have a 20 year old boiler (the house is 20) & we have been told it isn't safe. We have NO savings, & hardly any 'spare' cash each month - so what have we been spending all our money on, you may ask - well, school fees !! I worked out that over the last 12 years, we have spent at least £130K on school fees! I do consider it money well spent, our children have had an excellent education, but I often wonder if it was the right decision, especially when we find ourselves in this position now.

The other 'urgent ' item that we need the loan for is the final years school fees !! Other than the boiler, the house is fine, & my valuation I feel was a conservative one.

PS we were accepted for the unsecured loan, & I'm hopeful that this will be all we need since it now enables me to clear at least one of the cards. I think I've learn't a lesson here & could easily do without clothes/holidays/exensive cosmetics for at least a year!