All About Loans Weblog

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.

There are a number of potential triggers that could be helping the housing to crash.

First of all the credit crunch has been making debt much more expensive in the past few months. As well as being more expensive, borrowing is also a lot harder to come by, with few of the cheap loans that were available last summer.

Secondly the buy-to-let sector is also heavily exposed after having grown out of almost nothing a decade ago to accounting for almost 8% of all mortgages today.

Thirdly, Britain like the US, has its own sub-prime or ‘bad debt’ housing sector, with such a loosening in credit standards in the past few years that as many as 5% of mortgage borrowers are using 50% of their pre-tax income to service their debt.

The UK has many mortgages with ‘teaser’ rates - mortgages that let borrowers get low repayments for the first couple of years and then move onto the more expensive standard variable rate (SVR). There has also been a massive rise in the more amount of interest-only home loans taken out which rested on the assumption that the capital value of property would always rise.

Unemployment levels are starting rise, along with the cost of living. Fuel and food costs have both rocketed, leaving many households pushed to the limit. With more repossessions taking place, the housing market is seeing a drop in asking prices, as banks try to recoup their losses.

New figures show that the number of people declared insolvent is still going down. This is despite all the new fees banks have been introducing to try and rake back profit lost from repaid overdraft fees. And despite the raising of interest rates on loans and mortgages which have made it increasingly difficult to pay back loans. For the last six months the number of people declared insolvent has been decreasing, according to Government figures.

Although the drop in insolvencies was not expected by the experts they are still warning that the worst may still be yet to come.

Britons borrow money like no other country in Europe and while this is good for retailers, the existing mountain of debt as well as the recent interest rates rises means more and more of us could still be at risk of insolvency.

Currently in Britain it is estimated that 8.2 million adults are in serious debt while a further 2.1 million of us are struggling with repayments. So if you ever feel like you’re the only one suffering there is no need to feel alone. Do not be scared to approach your lender for advice if you feel your debt is getting out of control. Early action is the best way of avoiding a difficult financial situation in the future.

18% of adults in the UK own more than £10 thousand in unsecured debt, such as car loans, credit cards and hire purchase. That is equivalent to 8.2 million adults and the number is only going up. Men were at more risk of building up large debt with 18% of men reporting debt of £10k compared with 15% of women.

USwitch.com has commissioned research which has revealed that debt-ridden Britons owe approximately £1.3trillion to banks and finance companies. The average Briton now sees almost 50% of their monthly income eaten up by mortgage repayments and other debts.

This commitment to repaying personal loans, credit cards and mortgages is meeting the fast-rising fuel and food costs head on, with many families forced further into the red each month.

It is estimated that as many as one in three mortgage-holders face the prospect of real financial hardship as a result of being tagged with the sub-prime logo.

As many as 9% of the UK’s 16.5 million mortgage-holders are now considered as sub-prime by lenders because they have ended up falling behind on their debt repayments. These borrowers are all considered as sub-prime borrowers by lenders and will find it increasingly difficult in the near future to secure credit at an affordable rate.

There is a chance that as many as 24% more mortgage holders fall into the high-risk category as a result of their personal circumstances. These individuals include the self employed who may have fallen behind on their repayments.

The majority of searchers looking online for loans and debt management are now typing in ‘bad credit loan‘, a far cry from the ‘cheap loan‘ search term so popular until last summer. This change in mindset signals are real turn for British consumers.

The days of easy credit are now well and truly over and the credit crunch can only be expected to claim more casualties in the next few months.

There has been a massive reduction in the number of mortgages available to homebuyers and re-mortgagors since last summer.

Figures recently published by financial information provider Moneyfacts has shown a fall by 40% in the number of loans now on the market. This is a result of problems in the US mortgage market which have now moved over here to the UK leading banks to cut the choice of mortgages the offer across the board.

There was a 22% increase in the number of mortgages available to consumers in the first six months of last year as a result of new lenders entering the market as well as older lenders widening their mortgage portfolio. However that increase has been more than cancelled in the past six months.

While both high and low risk borrowers have seen their options cut it has been borrowers with poor credit histories who have suffered the most. These borrowers are referred to in the banking industry as sub-prime borrowers.

So far over 4000 bad credit loans have been dropped by lenders for borrowers looking for owner-occupier deals while the number of sub-prime buy-to-let deals has gone down by 1000.

Less risky borrowers have also seen an reduction in the amount of options available to them as banks reduced the number of buy-to-let loans by 438 while the number of residential mortgages went down by 611 or 16% of the total available.

Since the whole Northern Rock fiasco took place commentators and analysts have been pointing the figure at anyone and everyone as to who should take the blame.

The Prime-minister is reported to being blaming the bank’s executives who recklessly lead to bank into murky water in order to receive massive salaries. There is an element of truth in this accusation as they were in charge when the whole crisis took place and so must bare some of the responsibility. In taking the bank to become on of Britain’s top lenders these executives became very rich in the process.

The whole time that Northern Rock rose up to become one of the Britain’s great financial institutions there were many critics who were sceptical about the long term future of the bank.

If we are to blame to government there it is more than reasonable to assume that it was legislation introduced by Margaret Thatcher that is probably responsible. For instance it was legislation in the early 1980s that was intended to break the monopoly of mortgage lenders that led to banks being allowed to lend money on domestic property.

The reason that the home loan market has become such as mess is that building societies now no longer have to work on the principle of using deposits in order to fund more lending.

Since its nationalisation it has dropped its 125% home loan and announced a rise in rates. Other changes are expected both at Northern Rock and other lenders as the credit crunch continues.

A yearly holiday trip is something that everyone looks forward to and prepares for, however one thing that most people fail to do is prepare themselves by knowing how to protect their cards while overseas.  Millions of Britons are placing their bank accounts at risk of identity fraud by not taking precautions while on holiday.

Holidaymakers go on holidays to escape the everyday worry of work and bills and daily routines and get away to relax and enjoy new experiences.  However, this relaxed attitude means that many cardholders end up being a bit too relaxed with their credit cards as well, placing themselves at risk of identity theft.  With you no longer on guard, fraudsters are able to steal details of your accounts and use that information to open new credit card accounts, loans or bank accounts.

Research has found that only around 42 percent of Britons take all the necessary precautions to protect their identity while on holiday.  Another 23 percent claim that they have never even thought about protecting themselves while on holiday.

With cases of fraud on the rise, it is important that everyone takes precautions and ensures that their identity is protected.  So before you leave on your holiday it is important that you lock away all your important documents and stash them in a safe place.  You will also want your neighbour or friend to collect your mail for you and keep an eye on your home.  While you are on holiday you should keep your boarding pass or any other document that may have any information about your identity, this includes receipts from credit cards or ATM machines.  You will also want to keep your passport in a safe and secure place at all times while on holiday.

By following this advice, you should hopefully only return with a tan and some great photos. Ignore the perils and six months down the line may be the first you know that your identity has been stolen by fraudsters. Often it is only when you are turned down for a personal loan or mortgage do you realise the damage done to your credit record.

For most people, getting approved for a credit card or cheap loan didn’t used to be a problem. For years now, lenders in the UK were falling over themselves trying to get their customers to borrow more and more money, and credit card lending in particular simply soared as a means of getting a good return for the banks with very little effort. Therefore, for most people, banks have been more than willing to provide credit cards, however, not always at the rates and on the terms that customers would ideally choose.

However, with the current liquidity crisis in the financial markets, some people are beginning to fear that it is going to become more difficult to get access to credit. This, it is believed, will be especially true for people with poor credit ratings or poor credit histories. This is because the current crisis originated in the US bad credit loans, or ’sub-prime’ market which is based on lending to customers with poor credit ratings.

What this might mean is that lenders will begin to get more cautious about lending to customers who are seen as a higher risk. This would include those with poor credit histories as well as certain other high risk groups such as students. However, it appears as if there is still a lot of credit on offer from the market as a whole, and therefore, for those with good or average credit ratings, credit cards and personal loans should still be pretty easy to find.

As mortgage lenders start to hike-up interest rates for risky borrowers, finding a mainstream mortgage may be the easier option.

Many borrowers who have poor credit histories are being advised to switch to a mainstream mortgage if they can in order to avoid paying the extremely high rates of interest.

The fixed rates of sub prime home loans have been rising at an extraordinary level over the past few weeks as the number of defaults of sub-prime borrowers in the US begin to impact on the lending market at home.

British lender Northern Rock has put up rates on its sub-prime fixed rate offers by 1.25% recently. A number of other lenders have followed a similar path. Sub-prime tracker products are increasingly difficult to find as more and more lenders are removing these products from the market.

If you currently have a sub-prime deal and it is coming to an end soon you should seriously investigate the possibility of switching to a mainstream loan deal. You may be eligible for a mainstream deal if you have been consistently paying off your mortgage each month in full and on time. By switching you will be able to take advantage of lower interest rates and possibly save thousands over the lifetime of the mortgage.

Fixed rate mortgages are popular among people who have previously had a sum-prime mortgage as the certainty of the fixed rate makes it easier to manage your finances even if it might be more expensive than a tracker.

£50m has been paid out by us in missed payment fines in the first half of this year. This is despite the fact that many card companies have dramatically cut their penalty charges.

It is estimated that roughly 4.1m monthly card payments were missed since the beginning of the year, coming to a combined total value of £694,509 per month.

Currently the average cost for missing a payment stands at around £12, which is just over half the average £20 which used to be charged. The reason for a decrease in the charge is because of an Office of Fair Trading investigation which ruled that the charges were too high.

The combined total of the payment fines highlights the fact that many of us are struggling to repay our loans and the high interest rates are only going to make matters worse.

A £12 fine on top of your debt as well as the growing pile of interest will combine to make it more and more difficult to repay the loan and as time goes by the pressure will only continue to grow.

The effect of missing a payment can have serious repercussions on your credit rating and may last as long as 3 years on your credit report. Sometimes a poor credit rating will mean that you charged more interest and get turned down when you apply for personal loans or mortgages.

Those of us who are most likely to miss a payment are the 25 to 34 year olds. Roughly 13% in that age group have missed a payment in the past 6 months.