Do I Have to Pay Secured Homeowner Loans Before Unsecured Loans?

Yes – if you do not want to lose your home.

One of the main advantages of unsecured loans over secured homeowner loans is that they are not secured on any of your assets. If you fail to keep up repayments on an unsecured loan, the lender cannot force you to sell any ‘collateral’ – your home, your car etc – to reclaim their debt. They have to go through a court procedure to obtain a County Court Judgment or similar to try and force you to repay what you owe.

However, with a secured homeowner loan, the lender has a legal ‘charge’ over your property. This means that in the event of you not paying your secured homeowner loan payments, the lender can seek a repossession order and force your property to be sold. They can then use the proceeds of the sale to repay the money that you owe them.

So, any loans that are secured on your property – including mortgages and secured homeowner loans – should be your priority when deciding what bills you plan to pay every month.

In terms of repaying your loans, there is no set, legal ‘order’ in which you have to pay back the loans. Nothing forces you to make a payment towards your secured homeowner loan before a payment to your unsecured loans.

However, to avoid the risk of a lender taking you to court in search of a repossession order, you should always try and make any secured homeowner loan payments before your other debts. As the lenders say ‘your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it’. So, you should always pay secured homeowner loans before unsecured loans if you possibly can.

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