Loans

The first case against various lenders allegedly mis-selling Payment Protection Insurance policies goes to court soon.

Brunel Franklin is one of the UK’s largest claims companies, and they will be challenging some well know high street lenders; Lloyds TSB, Firstplus and Egg about having mis-sold overpriced payment protection policies to their customers taking out credit cards and loans.

Wondered why the Picture the Loan advert hasn’t been on TV for a while?

Picture Financial services, the personal loans company, has always had much criticism from the public who see it as one of the most irritating adverts on TV. It also had several complaints about it from viewers to the Advertising Standards Agency (ASA) who have reviewed it and ordered Picture to stop showing it on television in its current format as it had broken advertising rules.

Amid the financial news today, finance experts have been offering some sound advice to homeowners or those looking at taking out a loan.

The Post Office will be looking at filling the gap in the market left after Northern Rock’s recent decline and will offer its own mortgage service to those in the North East of England after teaming up with Bristol & West bank.

If the trial in north-eastern England shows promise, then the service will begin to be offered nationwide.

Mortgages will only be available to those with no history of credit problems and anyone wanting a 95% mortgage or less.

Read more here at Post Office to launch loans

The Guardian wrote a piece on secured loans yesterday, succinctly pointing out that consolidation loans are generally taken out by those who are in dire debt circumstances as they feel this is the only option left to them.

It has become apparent though, that many people who go on to take out a consolidation loan do not realise that they are putting their house in jeopardy. People don’t seem to comprehend and still believe it is only the mortgage that is secured against their home. Even though the phrase ‘failure to keep up with your payments may result in your home being repossessed’ is generally prominently displayed in advertisements on TV and magazines, studies have pointed out that borrowers don’t think this includes their other debts.

The Consumer Credit Counselling Service (CCCS), have seen a rise in homeowners suffering real problems with repayments after getting a debt consolidation loan. These loans are only suitable for a small percentage of people who are looking to help with their debt, about 3% of the population. However many advertisements make it seem like it is the answer to most peoples growing debt problems when in actual fact it often makes them worse. Many people then go on to get into further debt.

A few sensible points suggested if are looking at taking out a consolidation loan:

• Check the small print for penalty charges

• Don’t borrow more than you really need

• Don’t automatically opt to pay the Payment Protection Insurance - for most it is unecessary - think carefully first

View the article in full here

You can visit Consumer Credit Counselling Service for free debt advice at www.cccs.co.uk

The number of people moving overseas to live or buy a holiday home has increased over the past decade. The Financial Services Authority (FSA) who act as our financial watchdog, has warned expat borrowers to beware of the exit fees they are being charged by their lenders once their loan or mortgage has been paid off.

In some cases people have been charged more than they were told when taking out the loan - those people will need to claim from the lender to receive a refund.

The FSA has tried to prompt UK Mortgage lenders to get rid of or at least reduce the redemption fee that is charged. Until that happens expats who are thinking of taking out a mortgage overseas should check the facts and figures before signing up to anything.

Read the article in full here.

Interest rates on mortgages issued by some banks have increased recently, while others have taken measures to tighten up their rules on lending, especially to those with a poor credit history.

Fionnuala Earley, of Nationwide building society, says;

“The same person trying to get a mortgage will find the situation more difficult now than three months ago.”

Changes are being made now in the UK to prevent a similar episode to what the US has recently experienced with their sub-prime market.

There are thoughts that this may also now affect house prices - probably no bad thing considering how the average house price has tripled over the past decade.

Read the full article here.

IVA.co.uk has expressed its concern about sub-prime mortgages and loans being the only choice for some people. The problem with sub-prime lending is that the loan to a person with a bad credit history increases the potential risk the borrower will default or miss repayments and so because of this they charge very high rates of interest on the monies borrowed. This in turn can lead to those in debt increasing their debt.

Andy Davie from IVA.co.uk says;

“We at IVA.co.uk are worried to hear reports of the growing number of people being forced into the sub-prime market for loans and mortgages. Sub-prime lenders specialise in offering mortgages to people with poor credit ratings at very high interest rates and this will particularly apply to those undergoing IVAs…

My solution is simple. Property issues should be dealt with in the first year of an IVA, as is already the case with bankruptcy…

This will help to prevent those coming out of IVAs from entering further spirals of uncontrollable debts.”

Read the article and more about IVA.co.uk here

There was a very interesting story about microfinance on the BBC news website yesterday. Microfinance is a term used in which a financing body to provide poor people with a small loan - usually less than $100 - in order for them too start up a business or help a business to grow. The practice originated in the late 1970’s, although there was evidence of it before this time, it generally didn’t pass the following 2 key factors:

• provides financial funding to poor people through a market based enterprise without the need for subsidising the venture

• demonstrates that poop people can be relied upon to repay any loans taken out

The article demonstrates that it is women who benefit most from this practice of lending as:

‘Women tend to invest in three things: health, their children’s education and the home, she says. Men, on the other hand, put more back into the business.’

Traditionally finance does not cater for women - who make up some of the worlds poorest - usually due to unfavourable terms or the fact they are usually on a small scale, however they can make a huge difference to women, not just in developing countries but also developed countries like the UK.
The article reports that

‘Mirofinance helps give women an income and dignity’.

It also helps women save for the future, provide more for their children and provide local employment to others. Read the full story here.

A recent survey by Abbey Loans suggests that we are a nation of ‘friend lenders’. The survey revealed that asking to borrow money from our friends is generally our first port of call, if we need an extra £50 to see us through to the end of the month - in fact about 36% have admitted to helping out their friends financial shortcomings now and again.

The average amount we loan to friends each year is £116.  Beware though - some relationships can falter if the loan isn’t paid back or there is some discrepancy about the amount, this accounts for 28% of those asked.

Read the whole article here