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How can you avoid losing money?

Wednesday, March 5th, 2008

Very few of us can claim to have made no financial blunders in our lives. Sometimes the temptation to spend some of your savings on a needless treat can be too great, or we might fail to invest our money smartly, instead leaving it gathering dust in our current accounts with little prospects of gaining much interest. Below are highlighted some of the biggest and most common mistakes you can make with your money.

Many people set some money aside in case of a rainy day but even here you have to be smart in order to avoid losing out on possible financial gains. A good place to keep your savings is in a tax-free shelter such as Isa. In an Isa you can shelter £3,000 from the 20% savings tax that the government slaps on it.

Another mistake people make is in taking the first loan offered to them either on the forecourt or by their bank. Rarely are the big banks the place to find a cheap loan and forecourt finance frequently involves APR figures usually reserved for high cost store cards. The answer here is to shop around. Plenty of websites offer advice on current market rates on loans. Choosing wisely could save you hundreds of pounds.

Thousands of people still fail to plan effectively and efficiently enough to minimise the effects of inheritance tax. The best way to make sure your money goes where you want it to after you die is to make a will. If you fail to make a will, than the first £125,000 will go directly to your spouse along with all your possessions. The rest of what you own will be shared equally between your children.

Posted in Loans, Finance, Secured Loans, Unsecured Loans, Tenant Loans, Homeowner Loans, Interest Rates, Banking, Borrowing, Debt Management, UK Finance, Personal Loans, Store Cards, Cheap Loans | No Comments »

Record debt for homeowners

Monday, December 31st, 2007

Five consecutive interest rate rises over the past 12 months meant that households are now facing a record debt burden. Even now that the base rate has dropped by a quarter point, it will be a while before financial relief is felt by most UK households.

Recent research suggests that 19p out of every £1 earned by households goes towards repaying accumulated debt and the interest on that debt. Although this sounds grim, much of that debt is secured against property, rather than in unsecured loans and high interest credit.

The previous debt record was back in 1990 when debt accounted for 18p in every £1.  The burden of debt has been on the rise since 1997 when the figure was just 12p in a £1.

Even with the recent drop in base rate, the debt strain could get even worse by the end of the year. More and more of us could start to find it increasingly difficult to pay off our debt and more and more of our income goes towards servicing our debt. This is always true around Christmas and New Year when people spend beyond their income.

The reason we are feeling a real squeeze on our finances is not only because of increased borrowing but also because of modest earnings rises since 1997, rising utility bills, higher petrol prices and the increase in interest rates. All these things leave us with less real disposable income, but a sense of entitlement towards the ‘good things’ in life means that many families take out loans to finance holidays, cars and luxuries.

Despite the rising burden of debt (or maybe because of!) our spending has been rising also at an average rate of 5.5% per year since 1995. However growth in income has not been rising by as much and has only increased by 4.9%. The difference is made up be households borrowing more money.

If you are having trouble paying back your debt then there is always the option of discussing this with your creditors and coming to some sort of agreement. Early detection of financial difficulties is the best way of dealing with the situation. Debt consolidation loans offer a good way of re-financing at a lower rate over a different term and one monthly payment is easier to manage than several.

Posted in Debt Consolidation, Loans, Bad Credit, Finance, Spending, Property, Secured Loans, Unsecured Loans, Tenant Loans, Homeowner Loans, Poor Credit History, Interest Rates, Credit Cards, Income, Mortgages, Borrowing, Bad Debt, Overdrafts, Credit Record, Debt Management, UK Finance, Personal Loans, Store Cards | No Comments »

Millions In Serious Debt

Friday, September 28th, 2007

According to research by debt consultancy Thomas Charles, more than eight million adults are now in serious debt. This is a thirty percent increases over the past year, largely due to the rising interest rates. The 8.2 million people who are in serious debt account for 18 percent of the adult population. The average adult who is in serious debt has £10,000 or more of unsecured debt. Unsecured debt accounts for credit cards, overdrafts, loans and store cards. As many homeowners struggle to make ends meet with rising mortgage payments, the cost of unsecured debts seems to be rising.

The number of people who are struggling to meet debt repayments are has also increased. Around 25% of those with serious debt claim that they frequently have problems meeting their debt repayments – a nine percent increase from last year. A poll that was conducted shows that people who live in London are those that are most likely to be struggling with debt. Around forty percent people living in London have debt of 10,000 pounds or more with regular problems repaying their debt. In the south of England twenty percent suffer from serious debt and repayment problems while just eighteen percent in the Midlands and Wales suffer from the same dilemma. More and more, experts are advising consumers to watch their spending habits, to prepare a budget and pay off their credit cards, personal loans and other debts as quickly as possible. With the effect of the recent rate rises waiting to sink in, many homeowners are advised to start budgeting and cutting down on unnecessary expenses. For those who are in serious debt, it is advisable that they seek financial assistance.

Posted in Loans, Bad Credit, Finance, Unsecured Loans, Financial News, Credit Cards, Borrowing, Bad Debt, Overdrafts, Debt Management, UK Finance, Personal Loans, Store Cards | No Comments »

Unsolicited Credit Cards

Monday, June 11th, 2007

Clothing and furnishings companies are reportedly bombarding consumers with offers for loans and credit. Other companies have done this in the past, but this company takes it to the next level by offering credit that hasn’t even been applied for.

Experts claim that the Consumer Credit Act is flawed.  It allows companies to send unsolicited credit to people who cannot manage their credit, or cannot balance the offer of credit with their ability to repay it.

MPs are demanding that the Act is overhauled to stop this practice.

GE Capital has sent out unsolicited Laura Ashley cards.  This company is also responsible for almost 50% of the UK’s store cards. These cards come with high interest rates that are charged in an unusual way: the oldest debt is not paid off first. In fact, some large debts keep collecting the entire allotment of interest until paid in full.  However, all small purchases are paid off, regardless of the date of the purchase.

Liberal Democrat Treasury spokesman Vincent Cable said: “Once again, GE is promoting irresponsible lending. It is high time this card upgrade loophole was closed. We called for the law to be changed in 2005. In the meantime, thousands more people have found themselves with credit cards they didn’t ask for and do not want.”

A spokesman for the Citizen’s Advice Bureau said: “Consumers take out a store card with a specific purpose. It is wrong to then force a credit card upon them that has an entirely different use, giving them an opt-out only if they say they do not want the card.”

Posted in Loans, Bad Credit, Finance, Spending, Financial News, Interest Rates, Credit Cards, Borrowing, Bad Debt, UK Finance, Store Cards | No Comments »

Store Card Credit Cards

Thursday, May 31st, 2007

A store card is simply a credit card that is issued by a retailer that works like a credit card.  The store card offers interest free periods with a credit limit and you will be required to make a minimum payment each month on the account.  Store cards are typically used for one particular retailer such as Marks & Spencer’s, however there are retailers who are now offering the option of allowing your store card to be used like a credit card at other retail shops.

The retail credit card issuers are almost too happy for you to allow your store card to become a credit card, as you will then be allowed to shop at more places and spend more and eventually fall deeper into debt, which will mean that they will be making money off of you through high interest charges.  At one point some retailers where informing their customers who were store cardholders that they were converting all their store credit cards into regular credit cards.  However, it was later disputed that not all customers were happy with the decision made by the retailer and it was later agreed by the Office of Fair Trading that the retailer should give their customer a choice.  As a result customers are now able to upgrade their store card into a credit card if the retailer offers the option.

If you currently own a store card and you receive a letter from your retailer that you are eligible to upgrade your store card to a credit card, you will first want to review the terms and conditions to ensure that you agree with everything listed.  You will want to compare the credit card terms with other credit cards to ensure you receive the best deal.  If you find that you are not being offered a good deal, then simply reject the offer and keep your store card the way it is.

This may be a good time to think about whether you need that store card at all.  Typically the interest rates are close to 30% - more than three times the APR on the average personal loan.  If you can clear your balance and close the card, or at least pay off the full amount at the end of each month, so much the better.

Posted in Finance, Spending, Interest Rates, Credit Cards, Borrowing, Debt Management, UK Finance, Personal Loans, Store Cards | No Comments »