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CCCS: Credit unions may not work for everyone

Wed, 28 Jan 2009 17:09:40 GMT

While there have been a number of "helpful initiatives" undertaken by credit unions in recent times, they may not be a realistic alternative to payday loans for some people, according to a spokesperson for the Consumer Credit Counselling Service (CCCS).

Frances Walker said that while new changes to credit unions - including the addition of current accounts and the ability for people to borrow money without having to save first - have been positive, they may not "plug the gap for everybody".

"The problem is there have been various initiatives over the years to try and get credit unions really off the ground and I don't know if it is ever really going to happen," she explained.

Parliament heard the first reading of a new private members' bill that is set to update credit union and co-operative legislation last week.

Championed by Malcolm Wicks and supported by the Association of British Credit Unions, the legislation is said to allow credit unions and co-operatives to compete on a more even level with other financial firms.

Banks, government 'responsible for credit crunch'

Fri, 1 Aug 2008 16:32:19 GMT

Monetary institutions as well as the government can be partially blamed for the country's current financial situation, it has been claimed.

According to Fool.co.uk head of personal finance David Kuo, two in seven Britons believe that the banks are responsible for the credit crunch.

Mr Kuo stated that "for lulling people into believing that there would be no return to boom and bust", the government should also be blamed.

"Both the banks and the government have to take equal responsibility for the credit crunch," the expert commented.

The survey from the finance group also found that 23 per cent of people in the UK shoulders places the blame for their current monetary situation on themselves.

Spiralling interest rates as well as a drop in house prices have resulted in homeowners who have taken out secured loans feeling the pressure, according to a report from the Daily Mail.

Secured loans 'are an option for those in debt'

Wed, 23 Jul 2008 15:26:58 GMT

People in debt and looking for an option to alleviate such arrears could turn to a secured loan, according to a financial site.

Thinkmoney.com has claimed that a number of alternative debt solutions currently on the market are offering Britons ways in which to curtail what they owe.

A spokesperson for the financial solutions body stated that cost reductions are making it more difficult for companies to offer loans.

However, the expert stated that falling prices are providing enough equity to make a secured deal appeal to people.

The source said: "Talking to the right company can make all the difference between being offered credit at a competitive rate and being unable to avail a secured loan at all."

A new sourcing system was this week launched by BDS Secured Loans in Hampshire.

The procedure came into effect on Monday July 21st.

Graduates 'should not rush to pay debt'

Tue, 22 Jul 2008 11:34:47 GMT

People leaving university do not need to hurry when paying off their student debt, it has been claimed.

According to consumer website Moneyfacts.co.uk, the amount borrowed when studying does not have to be paid off straight away, as low interest rates apply and the debt can be paid off throughout working life.

The domain added that graduates need to make sure they get the best possible deal for them by shopping around the market.

"Searching for the best current account provider may be the last thing on many graduates' minds. But by taking the time to shop around, they could find an account that suits their circumstances," Moneyfacts.co.uk commented.

Meanwhile, figures released by money charity Credit Action show that the total amount of personal debt accrued by people in the UK stood at more than £1.4 trillion at the end of May 2008.

Consumers in debt 'have a range of options'

Thu, 5 Jun 2008 15:52:53 GMT

Consumers struggling to meet recent increases in mortgage repayments as well as rising energy and food bills should consider debt consolidation, according to an industry expert.

James Jones, the consumer education manager at Experian, claimed that such a move could help prevent finances from spiralling "out of control".

He said: "People should regularly evaluate their finances. I would recommend regular evaluation, monthly or quarterly.

"Debt consolidation is one of a range of options. I would encourage people to always speak to their lenders if they are struggling to make payments and if they feel the situation is getting out of control."

Recent research by CreditExpert.co.uk found that just 26 per cent of consumers are aware of the amount they need to repay on their loans, while one in ten respondents were clueless on the total debt they have currently accumulated.

Meanwhile, just 20 per cent admit to planning finances once every six months or less.

Motorists 'may miss out through lack of haggling'

Mon, 7 Apr 2008 15:34:09 GMT

Drivers who choose not to haggle when buying a new car could be missing out on significant savings, it has been reported.

According to Sainsbury's Bank, motorists could pocket £286 million if they are prepared to argue with dealers over the price of the vehicle.

In addition, the company stated that it is a good idea to also research the market for a car finance deal, if that is how drivers intend to pay for the vehicle.

According to Steven Baillie, head of Sainsbury's Loans, fewer people are currently buying new vehicles.

"Furthermore, those looking to finance their purchase through a loan need to make sure they shop around to find the best deal for them," he said.

This comes as statistics from the Society of Motor Manufacturers & Traders show that 2,355 more people bought new cars in March than experts had originally predicted.

February saw 'increased secured loan activity'

Wed, 2 Apr 2008 15:50:00 GMT

The number of secured homeowner loans as well as other forms of lending went up over the course of February, it has been claimed.

According to figures from the Bank of England, £7.4 million more in net lending was recorded over the course of the month than in January.

Lending to individuals has slowed to 8.9 per cent growth over the last 12 months, the body added, although there was an increase of 0.1 per cent in the three-month annualised rate, which is now 7.9 per cent.

House purchase lending was down in February against January, with 73,000 loans approved, while there were 110,000 applications for remortgages accepted.

But the Bank added that lending for reasons other than buying property went up against figures from January.

This comes as research from Sainsbury's Bank has found that a number of Britons transfer around £1.1 billion between credit cards in the UK every month.

Lovers 'often surprised by cost of nuptials'

Wed, 27 Feb 2008 15:49:24 GMT

Getting married in the UK costs more than engaged couples originally think, new research has found.

According to Alliance & Leicester, the average ceremony sets lovers back £3,500 more than they expected, costing some £19,400.

This 22 per cent difference in reckoning could see newlyweds fall into debt as soon as they tie the knot.

Head of personal loans at the firm Richard Al-Dabbagh states that "love is in the air, but so is inflation".

However, he adds that a personal loan could help out those looking to keep their cash in check on the big day.

"Getting the finances right is probably just as important as the choice of reception venue, entertainment or even the rings," says the official.

The world's most expensive wedding is thought to be the union of Vanisha Mittal and Amit Bhatia in June 2004.

Mittal's father spent $60 million (£30 million) on the ceremony.

Student debt on the increase

Tue, 14 Aug 2007 09:31:39 GMT

Those enrolling at university in September 2007 can expect to leave with a debt exceeding £20,000, new research has indicated.

A Push study in association with Lloyds TSB has found that this has increased from the £17,000 in arrears estimated for last year's bunch of new starters.

Furthermore, it found that debt for students has increased nearly a quarter over the last term, costing nearly £4,000 for every 12 months a person spends in higher education.

But Lloyds TSB's Catherine McGrath commented that strong financial provision may help people cut down the bill.

"Good budgeting skills can really help students to start off on the right foot while they get to grips with managing their own money. A smart approach is to plan ahead and seek guidance now," she said.

College students around the UK will find out their university futures when A-level results are published later this week.

An uncharted past 'leads to future without credit'

Tue, 7 Aug 2007 14:14:46 GMT

New research has indicated that a person without a credit history may find it harder to borrow money or make particularly large purchases, it has been claimed.

According to Experian, those without a well-documented financial background are a problem for lenders as they do not know how reliable they are.

Usually, money institutions would rely on the electoral roll to assess such matters but, as less people are voting today, this method is not as useful as it once was, it added.

And James Jones, consumer affairs boss for the company, has stated that lenders act more favourably to those with a charted monetary past.

"Lenders do like that proven track record and it can be difficult to get going if you've just turned 18 or moved to the UK from overseas," said the expert.

This comes as Credit Action research shows that the UK has a £1.3 trillion personal debt mountain.

BBA: Consumers' appetite for borrowing falls

Thu, 19 Jul 2007 16:25:46 GMT

The level of unsecured borrowing in June remained at a similar level to the previous month, suggesting that consumer demand is slowing, a new report has revealed.

The latest figures published by the British Bankers' Association (BBA) found that unsecured personal borrowing was "virtually unchanged" in June, after falling by £.5 billion in May.

Additionally, net mortgage lending increased by £5.1 billion but remained below the figure recorded in May and the monthly average of £5.3 billion.

In contrast, personal deposits increased by £3 billion and remained close to the average monthly increase of £3.1 billion.

David Dooks, BBA director of statistics said: "Consumers' appetite for unsecured borrowing on cards, loans and overdrafts remains relatively flat and with personal deposits holding up, household budgets, though clearly tightening, seem to be in good shape."

Brian Morris, head of savings policy at the Buildings Societies Association, said that borrowers should be wary of "overstretching" their finances, while interest rates continue to rise.

Equity release 'no longer a last resort'

Thu, 12 Jul 2007 17:03:38 GMT

Consumers' perceptions of equity release schemes have changed, according to one expert, who suggested that people no longer see it as a "last resort".

Glenn Osgood, partnership manager for Itune Group, a subsidiary of Help the Aged, said that many people are now choosing this kind of option to free up money in later life.

"We're finding that a lot of people are actually using equity release to fund a similar or better lifestyle through their retirement," Mr Osgood remarked.

In many cases, people choose equity release schemes because they have a great deal of assets but are relatively "cash-poor", he added.

Defaqto recently predicted that the UK's equity release market would pay an increasingly important role in retirement planning, but argued that consumer choice was still limited by the small number of "household names" offering products.

David Black, head of banking at the firm, said that equity release is a "genuine way" a number of people to finance their retirement.

Loans under 6% becoming 'extinct'

Wed, 7 Mar 2007 13:27:43 GMT

Loan interest rates less than six per cent are close to extinction, a consumer organisation has stated.

Michelle Slade, personal finance analyst at Moneyfacts.co.uk, has commented that the increasing number of individual voluntary agreements made over the last two years has seen lenders become more cautious.

As a result, there is a lack of loans between £5,000 and £15,000 given with an interest rate below six per cent, she added.

The rise of the zero percent credit card has also contributed to the decline of traditional personal loans, the expert remarked, but that does not mean that good deals are no longer available to those who shop around.

"Make sure you do your homework before signing up. Remember it does not always pay to remain loyal to your current account provider," she said.

According to money charity Credit Action, there is a combined total of more than £1.25 trillion in personal debt in the UK.

'Loan rates steady' despite Bank rise

Fri, 26 Jan 2007 15:48:18 GMT

The interest rate increase at the beginning of this month has lead to a rise in mortgage rates, although personal loan rates have stayed the same, according to MoneyExtra.

While some competitive lenders have hiked their charges in accordance to the Bank of England's decision, borrowers are still likely to benefit if they shop around for a deal now, the group said.

And with many industry experts predicting another rise soon, Robin Amlot, the organisation's senior editor, has urged consumers to be quick if they are considering taking out some extra money.

"If you're looking for a loan - whatever the reason, be it a new car, holiday, home improvements or even debt consolidation - you should consider acting now to lock in an attractive interest rate," he commented.

The Bank of England's base interest rate currently stands at 5.25 per cent - it's highest level since July 2001 - but lower than its decade-spanning high of 7.50 per cent in July 1998.

Small loans more expensive at big banks

Mon, 21 Aug 2006 17:37:19 GMT

Over half a million people who took out loans for less than £5,000 in the past year have, on average, been paying too much interest, according to uSwitch.com.

The best offer for a loan for under £5,000 is currently 5.9 per cent APR, but the 'big five' high street banks have been charging an exorbitant average of 15.4 per cent.

uSwitch's figures show that some people had been pay over three times the typical APR advertised by the same providers, and over four times the Bank of England's base rate.

This practice is known as using a 'tiered loan rate' system, where lenders offer lower interest rates for larger loans and higher ones for smaller sums and it is more expensive for small loans to be taken out over a longer period of time. Since one in six loans taken out over the last year was for less than £5,000, this is becoming a major headache for consumers.

Edwin White, head of personal finance at uSwitch.com commented: "Loans are undoubtedly the most cost effective option where a customer is looking to borrow large sums of money. However, with only a few exceptions the rates remain highly uncompetitive on small loan amounts. People really need to shop around when theyre looking to borrow less than £5k and make sure they are not enticed by headline grabbing rates that are only available on larger loans."

The most popular reasons for taking out these small loans are for car purchases, 36 per cent, debt consolidation, 30 per cent, and home improvements, ten per cent.

Real cost of uni far higher than estimated

Fri, 11 Aug 2006 17:03:31 GMT

Both parents and soon-to-be students are underestimating the costs of higher education, new research from the Association of Investment Trust Companies (AITC) has warned.

Most teenagers waiting to get their results said that they expect to come out of university with £6,199 in student loans, while their parents estimated £7,080.

Both were a long way out of line of the actual student loan figure of £13,500, however in the children's' case, half of the real figure.

Both parents and children said that they were concerned with the financial burden of university, with student loans and other debt the biggest issue.

"Soon students up and down the country will be preparing to start their university courses in the autumn," said Annabel Brodie-Smith of the AITC.

"However, it's concerning that so few would-be students and their families really comprehend the financial implications of going to university.

"Many young people go to university to enjoy some of the best years of their life but on graduation will find themselves struggling to repay their debt."

Borrowers facing 110 fees says survey

Wed, 19 Jul 2006 17:07:20 GMT

The average UK consumer with just five standard financial products to their name faces 110 penalty fees, with even the smartest and most organised struggling to avoid them.

Simply by taking out a mortgage, current account, personal loan, savings account and credit you could face up to £295 in fees in the course of a month.

"It is unbelievable that five financial products alone can be the root of so much penalty pain," said Stuart Glendinning of Moneysupermarket, which conducted the survey.

"There is a huge number of default and penalty charges of which even the most astute consumer can fall foul.

"It is important to raise the flag of awareness on these penalties and blow the whistle on providers who do not make their penalty fees transparent to consumers from the outset."

Personal loans contain up to 11 forms of fees, including early repayment charges, late payment charges and unpaid direct debit charges of between £25 and £30.

Days of easy credit over claims research

Wed, 28 Jun 2006 17:52:43 GMT

Refusals for new credit cards and personal loans are soaring as banks attempt to stem rising levels of bad personal debt, research has claimed.

Around 3.5 million applications for credit cards, personal loans and mortgages have been turned down over the past year, said Money Expert.

Credit cards have proved most sensitive to risk, with 1.7 million applications refused, while 1.5 million personal loan applications were turned down.

"The days of easy credit are drawing to an end for many people," claimed Money Expert chief executive Sean Gardner.

Credit-hungry Britons refuse to be rebuffed so easily however, with three-fifths of respondents saying that they would apply again.

Mr Gardner said that it was important to understand your credit rating before making repeated applications.

"It is important to understand your credit profile and be realistic about the products that are suitable for you," he said.

"The risk of being declined when you apply for a credit card, loan or mortgage appears to be rising among those applying to the wrong type of lender.

"To avoid disappointment and gain the best deals, people need to apply to the right lenders."

Cheap personal loans proliferate

Wed, 26 Apr 2006 18:05:06 GMT

Cut rate personal loans have proliferated, but many people are still failing to make a loan comparison and are accepting expensive deals from their banks, claims new research.

There are four times as many cheap personal loan deals available now as there were a year ago, but banks are continuing to charge high rates claims uSwitch.

"The personal loans market is at its most competitive for a long time as lenders continue to piggy-back one another to remain at, or reach, the top of the best-buy tables," said Nick White of uSwitch.

"Northern Rock, AA, cahoot and MoneyBack Bank in particular, have been some of the most consistent players in this competitive arena.

"For anyone considering taking out a personal loan - to consolidate existing expensive debts, to buy a new car or finance a home improvement - now really is a good time to utilise such low rates of interest," he added.

Two million in UK face £10k or more debt says survey

Tue, 18 Apr 2006 16:43:29 GMT

Around two million people in the UK are in debt amounting to more than £10,000 on credit cards, personal loans and overdrafts, debt advice company One Advice has claimed.

Almost a quarter of these are facing unsecured debts of more than £20,000.

Borrowers aged 35-44 are the worst hit, with around 650,000 owing upwards of £10,000.

A younger generation is catching up fast however, with 200,000 18-24 year olds owing more than £10,000.

"It is worrying that so many people owe so much in unsecured debt. This seems to be rising," said Chris Holmes, chief executive of One Advice.

"With many unsecured borrowing products having high interest rates, many people are entrapped in debt, often only paying off the interest accrued every month as opposed to the capital they have borrowed.

"Those caught in this situation need to take action otherwise it is likely that they will fall further into debt."

Almost one million owe more than £10,000 on personal loans, 350,000 owe the same figure on credit cards and 83,000 on overdrafts.

Banks are not the only ones at risk of bad debt however, says One Advice, with much of the cash owed to borrowers' friends and families.

Abbey offers baby £20,000 personal loan

Wed, 1 Feb 2006 17:16:52 GMT

Abbey has apologised to the mother of a one-year-old whose daughter had been told by the bank that she was eligible for a £20,000 personal loan.

Experts are claiming that the mistake illustrates the absurdity and potential dangers of the way finance providers' market credit.

Mum Donna Bartlett was astonished to discover that the letter addressed to her baby Daisy was offering such a large sum.

"Maybe the house could do with a lick of paint or perhaps you just want to splash out on something special like a holiday," read the letter.

"Which is why a personal loan of up to £20,000 would come in very handy. You could use the money to treat yourself right now. Or you could use it to transfer any debts and bills into one affordable loan."

Banks have come under heavy fire recently about the ways in which they offer unsecured debts to customers who may have a poor credit history.

"There's a lot of pressure on people to buy now and pay later and this kind of thing, although it's a mistake, isn't going to help matters," Ms Bartlett told This is Money.

"Perhaps things do need to be checked more carefully before they are sent out to children like Daisy."

The mistake arose after Abbey computers detected Daisy as a customer, after her mother opened up a £40 savings account in her name after she was born.

"There were a small number of children offered a personal loan rather than their parents," said an Abbey spokeswoman.

"It was a database error and we have apologised to parents and the problem has now been rectified."

Competition Commission warns on door step lending

Fri, 18 Nov 2005 16:28:10 GMT

The Competition Commission (CC) has warned people on the lookout for an unsecured loan that they will be paying over the odds if they choose to sign up with a doorstep lender.

In its latest report on the industry, the CC said that home credit customers appear "generally happy" with the product they receive, but that it comes at a "high price".

Doorstep creditors supply unsecured loans with repayments due either once a week or once a fortnight, with interest rates of typically more than 100 per cent.

Most users are on low incomes and will struggle to find secured or unsecured loans from any other provider.

"The home credit industry seems to us to provide a service which meets its customers' requirements," CC acting chairman, Peter Freeman told This is Money.

"Various factors, however, appear to point towards a lack of effective competition which may mean that home credit customers pay more than they should."

The CC is now considering its findings and could move to break up companies operating in the sector or act to break up any regional stranglehold after it reports in January.

The National Consumer Council (NCC) said that it was pleased with what it described as an "extremely positive and encouraging" update.

"We are particularly pleased at the consumer-focused approach of this inquiry," said NCC deputy director of policy, Claire Whyley.

"We hope it will lead to practical action and a fairer deal for Britain's two million poorest people who use home credit to make ends meet."

Three quarters of IVA applicants 'living beyond means'

Mon, 14 Nov 2005 13:42:00 GMT

Most people who apply for Individual Voluntary Arrangements (IVAs) to sort out their unsecured loans and credit card borrowing say they were simply living beyond their means, says a new report.

The findings have reignited the debate about low interest credit card deals and their effect on spending.

IVAs are an alternative to bankruptcy, and allow borrowers to pay off a little of their debt every month with suspended interest payments.

Accountants PricewaterhouseCoopers (PwC) examined the IVA applications made during July this year. Of the 1,257 made over the course of the month, 75 per cent of those with unsecured loans said that they had simply been "living beyond their means."

Just 20 per cent of those with difficult credit ratings said that they had lost their jobs or suffered a marital breakdown – traditionally the normal reasons for entering bankruptcy or receiving County Court Judgements.

"It implies there are two classes of borrowers," Pat Boyden, head of personal insolvency at PwC told the BBC.

"Those who consistently pay off their debts; then there is a revolving population of people who don't do that but occasionally fall off the conveyor belt."

Credit card companies have always been insistent that they are providing a responsible route to finance, pointing out that 93 per cent of credit card unsecured loans in 2004 were repaid within a year.

But campaigners have been quick to attack credit card companies' practices such as mailing out low interest credit card applications and in some cases even blank cheques.

And now rising levels of bankruptcy and bad unsecured loans are putting a press on credit card companies profit margins, while balance transfer credit card deals are estimated to cost the industry £600 million a year, despite the adoption of fees.

Banks are also increasing the amount of information on low interest credit card customers. With or without campaigners attention, it seems likely that access to cheap unsecured loans and low interest credit cards is likely to get more difficult, not less.

Borrowers ripped off 500% on personal loans cover

Fri, 11 Nov 2005 19:14:42 GMT

Consumers could be shooting themselves in the foot by taking payment protection insurance (PPI) from their lender, says a new personal loans market survey.

Some insurance policies can add £3,000 to the value of a £10,000 personal loan, increasing the cost by 467 per cent. Banks often charge as much as five times the price individuals can find at insurance brokers for the same cover.

Personal loans payment insurance bought separately could cost just over £650 for a period of five years, without reducing the amount of cover provided.

Nick White, personal loans and finance analyst, said: "The willingness of providers to promote payment protection insurance can lead to policies being mis-sold to consumers"

"Many are under the mistaken belief they are getting the best rate, or that by simply taking out this product they may be more likely to be approved for personal loans." He added that the APR of personal loans can increase once the insurance is added to their value.

An FSA investigation recently found that many banks were mis-selling PPI policies, which cover personal loans payments if the borrower becomes ill or loses their job.