Secured Loan for Divorce
See how a secured loan can provide funds during a divorce—for settlements or buying out a partner’s share of the home.
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A loan to keep things stable
Financial proceedings during divorce can be expensive. You can face major costs, whether it's expert reports or ongoing legal fees. These can be addressed as part of the overall financial settlement, but when one party lacks sufficient funds, they may need to consider borrowing money.
How secured loans can support you
A secured loan (sometimes called a homeowner loan) lets you to borrow against your property to cover these expenses. It can help you manage the essentials without rushing into poor decisions or selling assets you'd prefer to keep.
Here's how a secured loan might help:
- Cover legal fees: Divorce proceedings can be lengthy and expensive - a loan could help you stay on top of them.
- Buy out your ex-partner: If one of you wants to remain in the family home, a loan could help fund the settlement.
- Settle joint debts: Use funds to pay off shared obligations like credit cards or loans, simplifying the split.
- Fund your fresh start: From a deposit on new place to furniture and moving costs, a loan could provide the upfront cash.
Tip: Because secured loans are tied to property, they often come with lower interest rates and longer repayment terms. This can make monthly payments more manageable during a turbulent time.
Before taking out a secured loan
While secured loans can be a helpful financial tool, it's important to consider the full picture before committing. You're using your home as security, which carries risk if repayments aren't met.
Key points to think about:
- Purpose: Be clear about how the loan will be used - a solid plan helps avoid overspending.
- Ownership: Make sure any joint ownership or mortgage issues are legally resolved first.
- Affordability: Can you manage the repayments on your own income? Think of future changes.
- Terms: Compare different loan providers to find the best rate and repayment term for your needs.
- Advice: Speak to a solicitor or financial advisor before taking on new borrowing during divorce.
Tip: Many lenders will need a formal valuation of your home, as well as proof that you can afford the repayments. Having these documents ready can help speed up the process.
Summing up
A secured loan offers vital breathing space during divorce and could give you more control over the next chapter. Just be sure to consider all the risks and speak to a professional if you're unsure.
Frequently Asked Questions: Secured Loans
Can I get a secured loan during my divorce proceedings?
Yes, you can apply for a secured loan during or after divorce - whether you need it for living costs, relocating, or legal advice. Lenders may want to see confirmation that the property ownership (and who's responsible for the mortgage) is clearly settled before they approve the loan.
What can I use a secured loan for during a divorce?
Secured loans can be used for a wide range of divorce-related costs - including solicitor fees, home buyouts, debt settlements, or starting over in a new home. As long as you meet the lender's criteria, you have flexibility in how you use the funds.
What if I can't get a secured loan?
Other options include litigation loans or divorce bridging loans, which offer upfront funding for legal expenses while the case is ongoing. Bridging finance can help if you're struggling in the short term, but it often comes with very high interest rates, and you must repay the loan from your settlement.
What if I can't get any kind of bank loan?
If you can't afford legal costs and can't secure a bank loan, the court will sometime make a Legal Services Payment Order. This forces the wealthier spouse to help with the other party's legal fees. Legal aid may also be available, particularly where abuse is involved, but eligibility is strict.
Do I need to be the sole owner of the property?
In most cases, you need to be the sole owner of the marital home to secure a loan against it. If you're joint owners, both parties will typically need to agree and sign off on the loan. Some lenders may require the divorce settlement to be finalised before going ahead with the application.
What is a soft loan?
Under family law, loans from a family member may be classified as a soft loan, which the court may not recognise as needing repayment. These are treated differently from formal, contractually binding obligations like commercial loans. A clear loan agreement is key to making the loan official and binding.
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