All About Loans Weblog

In the wake of the credit crunch it would appear that many credit card companies are increasing their interest rates on all customers. Customers who have borrowed large amounts and always meet their monthly repayments appear to be at most risk of seeing their interest rates go up by as much as double.

It would appear that the worst credit card firms for increasing their interest rates in recent months are the American owned ones. MBNA and Capital One are now charging some of their borrowers as much as three times more than the typical rate they advertise.

Capital One has stated that it is increasing the rates for many of its customers due to the changes in market conditions. However many critics are accusing the card companies of profiteering from customers’ misery.

Other MBNA customers have reported that after seeing their interest rates more than double they complained. However while MBNA did reduce rates they did not bring it down by the amount they had increased it.

Many people are now deciding to dump their cards if they are being treated unfairly and move to another lender.

If you have a large balance than you are best transferring to a card with a 0% offer or a card that promises a low rate for life. This stands for all customers. If you can switch to a card that promises a low rate for life than you should. This may not be possible for those customers holding large balances, in which case a cheap loan is the best option. It may not offer you the prospect of further borrowing, but a loan cleared even at the lowest rate will still be cleared sooner than a card paid off by minimal amounts each month.

Mint is currently offering a card with 0% balance transfer till January 2009 which then reverts to a rate of 14.9% along with a 2.5% fee.

News in from the British Retail Consortium (BRC) suggests that customers are shunning plastic and turning back to good old cash.

A survey conducted last year showed that 60% of purchases were made by cash, compared with 54% in 2006. The figures released did not offer a break down by month or quarter, so we can only speculate that most of the upturn in cash spending occurred in the latter part of the year, once the credit crunch had started to hit.

However, even before the prospect of recession was spoken of, most financial experts agreed that consumers were slowing turning away from credit cards and personal loans to fund their spending.  When the sub-prime lending crisis hit America, consumers were already getting twitchy about the ‘culture of lending’ headlines popular in the news and starting to review their desire for easy credit.

Many customers are still very happy to take out a loan for a holiday, new car or even just a spending spree, but lenders agree that most of the clients approaching them at the moment are looking to consolidate debt or lessen their debt burden.

With the cost of living rising, most sensible borrowers are now looking at ways of cutting their monthly expenditure - hoping to swap their high interest credit cards for a cheap loan.

It is no wonder that the BRC find that people currently prefer to spend the money in their pockets, rather than use plastic. With a credit crunch reality, fast rising living costs and wages static, people no longer want to borrow today and worry tomorrow, because they are already worrying.

Many credit card holders who are customers of Natwest have accused the bank of introducing stealth charges without giving its customers much notice.

Natwest, the second largest provider of credit cards in the UK, has changed how its reward scheme works for its air miles reward programme, YourPoints.

Part of the change in the way the card worked now means that cardholders have a £3 charge automatically charged to their account unless they spend more than £1000 on the card in a month.

While the scheme for the card was introduced last June the additional charge was added in December. Many customers have claimed that this charge was added by ‘stealth’.

Natwest has denied that the charges are stealth, claiming that the charges were flagged up in the customer information pack which they received when they signed.

Natwest has claimed that the charges were not introduced by the bank for six months because it wanted customers to familiarise themselves. However many customers have claimed that Natwest was being very crafty with the card by introducing the extra bill around Christmas. This meant that many people were going to be busy with all their deals and possibly miss out on the fact that an extra charge had been introduced.

A Natwest spokesperson has stated that: “We refute any claims suggesting that we have not informed customers appropriately. All customers who are receiving a £3 monthly fee have previously been advised of this fee and have actively chosen to opt-in to the YourPoints scheme.”

Customers of all credit cards would be advised to check the small print and to beware of using cards as form of borrowing money longterm. Cards not paid off monthly attract heavy charges in the long term and borrowers would be advised to move the debt to a cheap personal loan.

Banks are continuing to raise interest rates on personal loans by as much as 4%. Moves by the banks to increase loan rates lend more evidence to the claim that the credit crunch has finally begun to hit consumers.

So far nine major lenders have increased charges on new loans in the past fortnight. The decision by banks to increase their rates is a direct reflection of the fact that borrowing for banks on the international money market has gone up considerably in the past two months.

However not all the rises can be blamed on the credit crunch and it would appear that many of the banks that have increased their charges are also attempting to increase their profit margins on loans. This reflects the more cautious approach that banks are now taking to lending in the wake of the sub-prime mortgage crises that hit the US housing market.

Home loans have also followed a similar path with some rates beginning to go up as well as the introduction of much tighter lending criteria.

Many banks are trying to now make up for the massive losses that they have sustained over the past few months and most banks are now reluctant to lend to each other. This inability of banks to secure a ready source of money has led to interest rates being driven up among inter-bank lending. This increasing in borrower costs that banks have sustained is now being passed onto lenders.

However, all is not bleak for consumers seeking cheap loans. There are still bargains on the market for those prepared to shop around, especially for homeowners with good credit records.

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.

The global credit crunch could have the effect of forcing up interest rates on more loans and mortgages. This is because banks are being forced to pay more in order to borrow money. Because of the nature of the financial markets and how banking debt is packaged and sold on, many banks have ended up losing a lot of money because it is becoming increasingly difficult to sell on the debt as a result of increased default rates in the sub-prime market.

Financial institutions have had to endure massive losses as a result of the credit crunch and the effects are starting to ripple through into high street lending.

Investors have seen massive losses in recent months as well and as a result many investors have pulled out all together. Not everyone has lost out however with those who were willing to take a high risk strategy making massive profits.

Savers have also benefited from the rises in interest rates. Savers with fixed rate deals will see there returns increasing as providers have increased their rates.

With higher Libor rates (the rate at which banks lend to each other), banks have been forced to look for other sources of finance in order to fund their home loan lending. One way in which banks have done this is by increasing their savings rates. This will increase the amount of deposits that banks have thus easing the impact of the credit crunch.

With conditions as they are savers are in a very good financial position, where as borrowers are going to find it increasingly difficult.

Northern Rock the bank now most famous for having created the only run on a bank in over a hundred years and was bailed out by the Bank of England has now been accused of refusing to return the favour to some of its struggling customers.

Ron Hutcheon a solicitor from Liverpool and a partner at his company are currently defending actions brought by Northern Rock to the court against two borrowers from the bank. Mr Hutcheon believes that the case could lead to a landmark ruling over how banks treat borrowers who are finding it difficult to repay their debt.

Mr Hutcheon’s clients were both finding it increasingly difficult to pay off unsecured loans that they had taken out from the bank and a number of other lenders. On the advice of their insolvency expert both borrowers decided to take out an individual voluntary arrangement (IVA). This means that the lender agrees to write off a proportion of the debt while the borrower agrees to make monthly repayments for the next five years.

However before an IVA can be agreed to the majority lender, in this case Northern Rock has to agree to the arrangement. While all other lenders involved in the case agreed to the terms of the IVA, Northern Rock has refused to do so.

Northern Rock decided instead to take court action against the two lenders and obtaining a charging order against them. A charging loan means that the debt now becomes secured against the value of their property. If they fail to make repayments than both borrowers risk losing their homes.

The lawyers for the two borrowers have found that it seems to be common practice for Northern Rock to reject IVAs. If the court rules against Northern Rock than the bank may be forced to agree to IVAs in the future.

Mr Hutcheon is confident that his clients have a strong case and if they win there could be many more cases like the one currently in the courts coming forward in the future. Northern Rock however denies that the automatically reject IVAs. Rather they claim that the bank looks at each case by its individual merits.

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.

It was estimated earlier this year that around 400,000 drivers planned to purchase a new car during 2008, however many of them will end up wasting money by choosing the wrong finance deal.

According to research most car buyers will end up spending up to three months deciding on what type of car they want to purchase, but do not put as much effort in research into their financing.  Because of the lack of research for financing many buyers end up spending around £1,000 in unnecessary interest payments.  So as you research the market for the best car that is available it is a great idea that you search the finance market for the best loan to cover the cost of your car.

The first thing you need to decide is where to start your search.  Generally most car owners end up going for the great sounding finance deal from the showroom, however generally the showroom deals are far more expensive than a personal loan.  So you should start your search at your own bank and find out what the cost of a personal loan would be and search other banks and building societies as well as online brokers and comparison websites.

As you compare offers you will want to make sure that you view all costs that are involved and not only focus on the interest rate but other fees and charges that is involved in the offer.  You will also want to look out for payment protection insurance and if it is offered you will want to reconsider the offer to see if it is suitable for you.

Consumers have gone in search of banks with relatively few amounts of loans on their books since they are generally viewed as being a safer place to save at.

Bradford & Bingley is one such bank that is reaping the benefit of savers trying to find a bank that offers higher interest rates and fewer charges and fees.

B&B’s instant access account has come to be viewed as one of the best deals currently available on the market since it has no penalty charges and offers a very competitive rate of 6.25%.

In the past few months there has been a considerable amount of money moving around the market as a result of savers looking for safer options. B&B had been tipped as one of several banks that could follow Northern Rock’s path into decline. However this has failed to materialise and the bank is now riding a wave of consumer confidence.

Experts have seen how customers are becoming more and more nervous as the crisis deepens and are now looking for alternative accounts that offer better deals than the ones they had before.

HSBC is still considered the most stable and safest bank however since its level of loans the bank has borrowed is low when compared to the amount of money it has in its coffers.

However while savers are moving their money to safer banks many borrowers are left wondering what is going to happen to their mortgages as the crisis continues and may take more banks down.