All About Loans Weblog

Loans


  • 28
  • Aug

In these days of the credit crunch the biggest losers are those borrowers who banks consider as risky. Risky borrowers include a whole range of society including those on lower incomes, people who have missed payments in the past, as well as the self-employed.

If you are self-employed a on a contract then it can be easier to get a loan, however it is still not as easy as if you are employed by a company. Lenders differ in their requirements but generally employers want to see that your contracts are renewed regularly and that your business is not struggling.

People who have just started out working for themselves will also find that it is more difficult to secure credit than if you have been self-employed for a long period for time.

If you are looking for a home loan and you are self employed then using a mortgage broker might be the right way to go. Brokers generally tend to know what kind of people different lenders like to lend to. As well as this, many brokers have access to special deals which are not readily available on the high street.

Using a broker will also cut down on the chance of too many rejections coming up on your credit rating system because each time you apply for a loan a footprint is left on your credit rating. Many lenders will automatically turn you down if they see that you have recently applied for multiple loans, as they assume that you have been turned down and are getting desperate.

  • 26
  • Aug

With the Bank of England’s decision to cut the base rate by a further quarter point, most consumers would be hoping that loan rates would be showing a drop. Sadly that isn’t the case.

According to comparison site, Moneyfacts, 14 lenders increased their loan rates last month, with Tesco and the AA raising them twice.

Whilst personal loans are the last thing on many people’s minds right now - with the credit crunch squeezing us tight we are looking to save rather than borrow - many people are hoping to consolidate.

With food and fuel bills climbing and not expected to drop any time soon, most people are looking at ways to lessen their outgoings. For many this means finding a way to reduce repayments on loans and other credit.

The traditional way of doing this was the debt consolidation loan, where all your existing credit deals were paid off and replaced by one loan. However, many borrowers have been shocked to find that the rates quoted for the new deal are just as much - or more - than their existing deals. And that’s with spreading them over a longer term!

However, the future is not all bleak: many economists have reported that the lack of liquidity in the market (that’s how much money lenders have to lend to you and me) is increasing, which should ease the rates in the near future.

So, whilst you might have to stump up on your existing loans for now, there should come a point soon where you can get a better loan deal and save yourself some money.

  • 05
  • Aug

With the current economic climate where lenders are withdrawing loan and mortgage products from the market daily, you would think there couldn’t be a better time for choosing an independent financial advisor over a more direct approach.

However, many would-be loan clients are reporting a lack of trust in brokers and other loan agents, as stories emerge of American mis-handling of mortgage affairs.

Whilst the American story has rocked the world’s financial markets, the case for using an IFA is stronger than ever. Simply approaching your bank or usual lender is unlikely to net you the best deal.

“Since the credit crunch took hold the major lenders have made endless tweaks to their range of mortgage products,” says My Mortgage Direct director Cath Hearnden. “Rates have gone up and down, whole ranges have been withdrawn and new ones launched.

“It’s not surprising that borrowers are bewildered by this barrage of information and are worried that they might go for the wrong deal.”

By approaching a loan broker, a client can have the entire loans market searched on their behalf to find the loan tailored to their needs. This can save hours of searching the net for deals which often involve small print which affect the deal.

Whether you are seeking a home loan on a new purchase or looking to refinance your currently unmanageable credit situation, asking for professional advice is always a better answer than striking out alone.

  • 01
  • Aug

Financial advice website, Fool.co.uk has taken a swipe at ‘Sell-and-rent-back’ schemes, claiming they are ‘preying on the poor’.

Donna Werbner, property expert at Fool.co.uk says that the schemes are unregulated and many are unscrupulous.

Whilst the schemes claim to rescue homeowners in danger of repossession, Fool.co.uk claims that the reality is that the firms involved typically offer a purchase price some 15%-20% less than the market value at a time when the homeowners get behind on loan repayments.

“What is particularly shameful about these schemes,” says Ms Werbner, “is that they are targeted at homeowners facing repossession - so people who are at their most financially vulnerable.”

Some families have reported being evicted from their homes at a later date when the ‘landlord’ decides they want to sell the house at a profit. These families may have avoided repossession, but are still losing their homes further down the line with little in the way of funds to make another purchase.

Debt charities are advising customers having trouble in making loan repayments to first talk to their lender before making any move to sell. In some instances a lender will refinance the loan over a longer period or switch to interest-only rather than lose the customer.

  • 01
  • Aug

Mortgage Lenders and homeowners alike would both celebrate if the National Association of Estate Agents (NAEA) gets its way.

The group is lobbying the government to take heed of the American housing situation and act before it’s too late.

The US’s ‘Housing Bill’, whilst welcomed by those in the housing industry – and those suffering from the credit crunch – is said to be too little too late.

The Federal Housing Association is on-track to enable beleaguered homeowners to refinance their home loans through lower-cost FHA loans.

Should the Housing Bill be passed, it will introduce a national licensing system for mortgage brokers and loan agents. This should ensure that a repeat of the mis-sold mortgage crisis can never be made again, after tipping the country into recession.

Whilst UK home loan advisors are required to be registered, the NAEA wants to see the UK government to take heed of the financial crisis in America. So far more than a million American homes have been repossessed, a situation which nobody wants to see mirrored in Britain.

Peter Bolton King, Chief Executive of the NAEA, wants to see the government “supporting pro-active initiatives such as the blueprint recently drawn up by The Council of Mortgage Lenders to address the funding problems in the mortgage market.”

  • 15
  • Jul

75% of people are now predicting that house prices are going to fall in the next year. Only one in five people actually think that house prices will go up in value in 2009.

Thisismoney website took a poll of more than 4,000 people and found that 75% of them expect property prices to fall in the coming year with more than half actually predicting a fall of over 10%.

If property prices were to fall by 11% an average of £21,500 would be wiped off the value of the average home which is currently £194,895.

The crisis of confidence in the property market stands in stark contrast to the mood a year ago when a similar poll found that 55% of people believed that prices would actually go up in 2007.

A number of factors including a decline in affordability, a dismal economic outlook for the coming year as well as lenders tightening up on their borrowing criteria as a result of the credit crunch mean that now, the mood is very different. The number of home loans available on the market has diminished radically and lenders are extending fewer loans than ever before.

Consumer confidence was dealt a severe blow last September when Northern Rock saw the first run on a British bank in more than a century.

House prices rose to record highs in 2007 with the average price of a UK home peaking in August at £199,600. However since then months of successive falls means that average prices have now gone down to £184,895. Whilst some areas of the UK have seen prices still increasing, for the most part the housing market is witnessing a crash.

  • 30
  • Jun

More and more people are suffering from debt problems. Credit is becoming more and more difficult to come by and many people on fixed rate mortgages are going to come to face much higher mortgage repayments in the coming year.

Increased debt concerns are a growing problem for UK households and it is now feared that with the increase in debt there will be a corresponding rise in mental health issues.

It has been revealed that debt can trigger anxiety and stress, depression, self-harm and even suicidal thoughts.

Debt can easily spiral out of control, as it is as easy as missing just one payment and this can eventually lead to letters from debt collectors demanding that you pay back the entire loan. These letters are likely to be anxiety provoking as the letters become more and more intimidating. The combination of debt and creditor demands can lead to a massive build up of stress for many borrowers.

Lenders need to start being more aware of the anxiety that they can invoke in borrowers when constantly harassing them over repayments.

Experts are becoming increasingly aware of the mental health problems bad debt is creating and a code is beginning to be developed in order to protect customers with mental health issues.

The Money Advice Liaison Group (MALG) has published a ‘Debt management and debt collection in relation to people with mental health issues’. These guidelines are for money advisers, lenders and debt collectors on how to be more aware of mental health issues.

However, lenders are unlikely to be sympathetic to those who play the ‘mental health’ card as an excuse to not repay personal loans. Whilst this measure is of real help to those with genuine suffering, it is unlikely to allow bad debt clients to avoid their responsibilities.

  • 30
  • Jun

If you felt like most of your repayments for that bank loan you have were going on the interest, don’t expect a reprieve soon. Banks took advantage of the base rate rises last year to raise their credit card and overdraft interest rates well above the last base rate drop back in May and they don’t plan to use any future drops as an opportunity to give relief to their customers.

Some banks took advantage of the high-interest situation by increasing cash withdrawal rates on their credit cards by 5%. So try not to use your credit cards in bank machines, as the interest you pay on cash withdrawals are effective from the moment you withdraw the money. This is different from paying for something using your credit card because on purchases with your credit card you only start paying interest after the billing date.

Bank overdraft rates have also seen a disproportionate increase some by as much as 3.4% in the space of a year. This is despite the fact that base rates only increased by 1.25% and have now dropped by .75%.

Banks are rushing to defend themselves and have blamed the recent surge in cost to banks from having to pay back overdraft penalty charges. They claim that refunds from these charges are reaching into the hundreds of millions, however all the major banks have already set aside £400 million in compensation. More truthfully, inter-bank lending rates soared across the year as investments in American sub-prime lending crashed.

Thankfully for those needing to borrow money, loan companies are much quicker to offer rates reflecting the true base rate. Cheap loans are now reappearing, particularly for homeowners with good credit.

  • 25
  • Jun

Home owners are being warned to starting bracing themselves for a rough financial ride in the coming months, with increasing costs on the High street and falling prices on the property market.

2008 is proving to be a very tough year for many homeowners but it is expected to be particularly bad for those coming off short-term fixed rate mortgage deals.

The credit crunch that has so far managed to almost completely ruin Northern Rock and has seen the closure of a lot of loan products, is expected to continue for a protracted period and could worsen, meaning repossession and bankruptcy for many famlies. This is bad news for borrowers who have overextended themselves, as the old days of getting a cheap loan to clear maxed out credit cards and finances are over.

While banks are feeling jittery over the credit crunch so too are consumers lacking in confidence over the state of the economy as house prices start to come down. Many families hoping to move up the property ladder are sitting put as prices drop and the fear of negative equity sets in.

The Financial Services Authority (FSA) is currently warning that as many as 1.4 million borrowers are extremely vulnerable to a mortgage payment shock as they come off their cheap two year fixed rate mortgages in the coming year. Not only are interest rates much higher than they were two years ago but because of restricted lending criteria many banks may refuse to lend out the cheaper deals.

Since the base rate has been dropped from it’s pre-Christmas high of 5.75%, lenders have been hoping for a cut to their home loan rates. These cuts have barely trickled through though, as the inter-bank lending rate remains high and liquidity low.

  • 25
  • Jun

These days the news is filled with warnings that the stock market is going through a crisis and share values are well below what they were six months ago.

So what does that mean to all the people with large home loans? Well experts are warning that homeowners need not worry, as the recent volatility in the stock market is unlikely to have any real long-term affect on property prices.

The reason we need not worry is that despite the turbulence in the stock market the economic situation in the country is still very strong with unemployment low and inflation pretty much under control. Also historically there is evidence that stock market crashes do not have a negative affect on house prices. Looking back at the 1987 stock market crash for instance saw house prices remain strong and continued to remain so for the following years.

It is possible that the stock market crisis could even lead to a further rise in the property market as investors turn away from putting their money in the stock market and instead invest in buy-to-let housing. This up-turn for the finance industry could then see a fall in loan costs for borrowers.

As well as this the stock market crisis would have to last a lot longer before it really started to be felt across the rest of the economy. However mortgage prices could go up for some lenders because they rely on credit from the stock market.

So although homeowners are experiencing a down turn in house value, they don’t need to start worrying just yet about the value of their property being linked to the stock market.

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