Repossession risk

8 November 2010

When you sign up for a loan, you always think you will be able to pay it back. But sometimes unexpected things happen and you can’t make your payments. And by then it is too late to decide that you don’t really want to risk the house on that bet.

What should I use as security?

If the creditor asks you to provide security, don’t list things that are worth a lot more than the loan. Find out how much the goods are worth by checking how much those goods cost second-hand online.

Don’t risk things you can’t afford to lose

Only agree to include things you are prepared to lose if you get into financial trouble. So think twice about risking family heirlooms or things it would be very difficult to live without like fridges, beds or things you need for work.

You can only include things that actually belong to you. Don’t use things that belong to family members. If the creditor comes to your house to see what you have, check the list. Check that they haven’t included too many things and that they all belong to you.

What if they won’t give me the loan?

The finance company might tell you that you have to put up something that you don’t want to risk as security or they won’t give you the loan. Instead of agreeing, find out what the other companies are offering. You might be able to get a better deal by shopping around.

Security in your contract

Secured goods must be listed in the key information in your credit contract. The information must be clear and concise. If you can’t find this information in the contract ask the salesperson to show you, or take the contract to a community law centre to check.

Contracts that claim all your property

Creditors must identify the particular items that the creditor has a security interest in. A contract that claims an interest in “all present property” (meaning everything you own) is not clear enough under the law.