Loan protection is still necessary
May 31, 2011
Over recent years there has been a lot of new coverage about the mis-selling of payment protection insurance, or PPI, on loans, credit cards, and other forms of finance. This has been in the headlines more than ever over recent weeks, after a court ruling that resulted in banks having to compensate and reimburse consumers who claimed that they had been mis-sold the cover when they took out the finance.
All of the negative publicity about PPI and the way in which it has been mis-sold over the years by banks and financial institutions has put this cover in a very bad light, and many people who take out finance automatically think that PPI must be a bad think. However, officials have warned that the bad press that PPI has received does not mean that consumers who are taking out finance should avoid the cover but that they should shop around for a good deal that suits their needs.
PPI is designed to protect the monthly repayments on the finance that you are taking out in the event of accident, sickness, or redundancy. It can be very useful if and when it needs to be used. However, problems arose because banks and financial institutions had been found to be selling it to people that were not eligible to claim, making people think that they had to take it to get the finance that they needed, or adding it on without their knowledge.
One official said: “All of the controversy that has arisen over PPI should not make people think that they should disregard this cover, as it can be very valuable. However, it should make people think about checking policies to ensure that they are suited to their needs and make them shop around for the most competitive deals.”
Many will struggle with finances for years
May 30, 2011
There are already many people across the UK who are struggling with their finances and are finding it very difficult to cope with the increasing outgoings and their problem debts. However, according to a recent report the situation could continue to get worse for many working people in the middle and lower classes as a result of the amount that they earn compared to the amount that they are having to pay out.
A leading think tank, Resolution Foundation, has recently claimed that it could be another few years before workers in the middle and lower classes see any form of increase in their salaries. However, whilst workers are left languishing on frozen salaries the cost of living continues to soar, which means that more and more workers are going to find themselves in a situation where they cannot stretch their finance far enough to cope with their essential living costs and debt repayments.
The cost of food, energy usage, petrol, car insurance, and other living costs has been soaring over recent months, and many expect these increases to continue. However, if workers are left without a sniff of a pay increase until at least 2015, which is what the report claims, it is going to become increasingly difficult for them to manage. In addition to this, if the base interest rate increases many homeowners could see their repayments rocket, making a bad situation even worse.
James Plunkett, who authored the report, said: “We all know that the recession has hit living standards hard. But something deeper has changed in our economy — even during the so-called boom years, ordinary workers weren’t seeing their living standards rise. The big question now is what will happen when growth resumes — will ordinary workers reap any of the benefits? This report suggests that is far from certain.”
Personal loan rates at highest in a decade
May 23, 2011
It has been reported that rates on personal loans in the UK have reached their highest level in a decade, making it even more important for consumers who are considering taking out a loan to ensure that they compare the rates being charged carefully. The base interest rate is still at its all time low of just 0.5 percent, but despite this the rates on personal loans have soared to their highest in ten years.
Smaller loans in particular have been hit with these high rates, with the average rate on a loan for £5000 now coming in at 12.7 percent, which is the highest it has been since May 2000. There have been many fluctuations in personal loan rates over the past decade, with rates falling as low as 7.8 percent in May 2006. However, rates have been rising since this time and are now edging towards the May 2000 high of 13.1 percent.
One industry official said that one of the reasons behind soaring loan rates was that lenders were taking huge risks with personal loans that were unsecured because there was no collateral to provide them with the security that the loan would definitely be repaid one way or another. In the current climate this is a huge risk for banks and therefore they are charging much higher rates to cover themselves for this risk.
She added that it was very important for people to compare loans for the best deals before making any commitment, as otherwise they could end up paying over the odds.
She stated: “Most people’s first port of call for a loan is their bank, but in most cases this is far from the cheapest option. The price war between supermarkets isn’t just on groceries, it has spilled over into the personal finance market. On nearly all loan amounts the supermarkets have the most competitive rates.”
Increase recorded in repossession numbers
May 13, 2011
It has been reported recently that the number of repossessions has increased as cash-strapped homeowners once again struggle to cope with finances and keep up with repayments. The figures relating to repossessions was released by the Council of Mortgage Lenders, causing concern amongst many officials that people are now struggling again due to the soaring cost of living.
In the three months to the end of March the number of repossessions is said to have increased by around 15 percent. This followed five quarters running consecutively where the number of repossessions had actually declined. In the three months to the end of March over 9,000 properties were repossessed by lenders, which was the first increase since the third quarter of 2009.
According to the Council of Mortgage Lenders the number of repossessions could continue to soar this year, with predictions that 40,000 people or more could end up losing their homes over the course of the year. This is up from 36,300 in 2010 and officials believe that the rise will stem from the difficulties that people are facing with their finances due to frozen or falling income, soaring living costs, government cuts, and rising taxes. It is thought that at present many people are being given more breathing space due to the low base interest rate, but if this increases over the coming months the prediction could increase significantly.
An official from the Council of Mortgage Lenders stated: ‘Looking ahead, the financial position of many households is likely to be stretched for some while, and some will inevitably find themselves in difficulty. Lenders have a range of options to nurse borrowers through temporary problems, but will clearly need to be mindful of the regulator’s concern that too much forbearance may be as bad as too little.’
Poor credit affecting consumers’ ability to get affordable loans
May 3, 2011
Many people are struggling to get an affordable loans these days, with banks particularly cautious about who they lend to after the turbulence of the last couple of years in the financial markets. Over the past few years banks have become far more stringent about who they are prepared to lend to and it has become increasingly important for those thinking of applying for credit to ensure that they check their credit report.
According to one recent report the poor credit reports and scores that many people have are hampering their ability to be able to get finance at an affordable rate - or in some cases at all. Lenders are being more and more stringent about the credit score and history of those that they are prepared to lend to and with this in mind more and more people are now being turned down for loans or only managing to get loans with very high APRs.
Industry experts have advised anyone that is considering applying for credit of any sort to make sure that they check their credit report and score first. This can be done through one of the three credit reference agencies in the UK, which are Experian, Equifax, and Callcredit.
One industry official said: “Many people still fail to realise just how important their credit score and history is when applying for finance. If they apply without checking their credit they stand a far greater chance of being turned down or only being able to get a loan with a really high APR. If they check their credit first they can give themselves some time and improve their credit if they need to before applying for a loan.”