Lenders looking to secure unsecured debt against property

In a bit to try and minimise on bad debt levels a rising number of lenders are trying to turn borrowers’ unsecured debts to secured ones by seeking specialist court orders known as charging orders, which effectively secure the consumer’s debts against their home. A recent report has indicated that there has been a dramatic rise in the number of charging order applications being filed by lenders, as more and more try to boost their chances of getting money back from borrowers.

Bad debt levels have risen sharply in the UK over recent years, and lenders have looked for various ways to try and recoup their money. Although the charging order does not mean that the borrower has to sell their home right away to repay the debt, it does boost the lender’s chances of getting their money back when the homeowner does eventually sell up.

With regards to the rising number of charging orders, one industry official said: “It’s a drastic increase. You take on an unsecured loan or credit card, you fall into arrears, the bank decides to take you to court, and if you still don’t pay you end up with a charge imposed on your house by the court. Lenders are looking at all options to get their money back.”

One debt advisor said: “Lenders are worried about people’s ability to repay and a charging order gives a guarantee to the lender that at some point in the future they will get their money back.” However, he added: “What’s quite difficult for a creditor to do is to follow that through to repossess the house. Repossessions as a result of charging orders are extremely rare.”

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