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Archive for September, 2007

Avoiding Credit Card Fees

Wednesday, September 26th, 2007

Credit card providers are now required to show customers just how much interest they are being charged and have been limited to charging customers only £12 on late payments.  Although the late payment charges have been reduced there are many customers who are failing to meet their monthly payments, with a total of £230 million being charged in late fees last year.  Some may miss their payment simply because they have forgotten, whilst others are struggling to make ends meet on bills and loan repayments.  Some may think that a £12 late fee is not much, however the late payment charge is more than an irritant.

If you miss a credit card payment you will find that you will not only be charged the £12 fee, but you may also lose the special rate on your credit card.  Often credit card issuers reserve the right to raise your credit card interest rate if you break the terms and conditions of your contract, which will end up costing you more than just a mere £12.  You may also discover that your late payment will affect your credit report, and if you miss more than one, lenders may look upon this as a negative mark against you putting you at risk of attracting higher interest rates on other financial products, such as mortgages and personal loans.

One way of ensuring that your payments are made on time is by setting up a direct debit.  This way your credit card bill will always be paid on time and you can easily avoid any credit card late-payment fees.

Posted in Bad Credit, Borrowing, Consumer Credit, Consumer debt, Credit Card, Credit record, Debt management, Financial products, interest rates, Missed payments, Personal debt, Personal loans, UK Finance | No Comments »

Leveraging Equity

Thursday, September 13th, 2007

With all the debt management products on the market, the most overlooked is leveraging equity from the home.  The practice of releasing equity to manage debts, improve lifestyle, or add equity to property is not new. However, the idea of releasing equity from your home and using the money to build wealth is a recent notion.

In the past, people worked to pay off their mortgage and escape debt. Today, people are releasing that equity, investing it in businesses, property, and stocks, and building wealth.

This wealth is then returned to the investment fund and used to continue building wealth. This is fairly secure, as long as the investor doesn’t become involved in any high-risk ‘get rich quick’ schemes.

Financial companies are becoming familiar with the concept of leveraging the money in your home to build wealth, instead of hoarding it.  A cautious person can release the equity in their home, and earn enough money in 10 -15 years to restore the money.

With a good investment strategy, the homeowner will have their home loan repaid before the end of the mortgage term, and give the homeowner thousands in profits.

Playing it safe can be dangerous. Many people will not hesitate to apply for a second mortgage, or a secured loan to help them escape an emergency. People will draw equity from their home when they are ill, lose their job, or have a family crisis.  However, they will not withdraw the money to build wealth.

Prevention is a better strategy than waiting until you are in trouble and then trying to dig yourself out of the hole.

Posted in Borrowing, Consumer Credit, Equity release, Financial news, Financial products, Home Improvements, Homeowner Loans, Homeowners, mortgages, Property, Remortgaging, Secured loans, UK Finance | No Comments »

Possible Property Crash?

Thursday, September 13th, 2007

According to a report from Fitch Ratings, Britain’s economy has been rated as one of the most vulnerable to a property crash.  The report went on to state that the property in the UK is 20% overvalued, coming in second behind France.

Other countries that were reportedly the most exposed to economic problems were not only the UK but Denmark and New Zealand as well, especially if the property prices weakened and interest rates increased.  The report from Fitch also reported that house prices have been far more than the income received by Britons over the past ten years, with the average house now costing £196,500 and the average gross salary at £23,250.

All this is bad news for those overstretched by home loans who could end up in negative equity if or when prices fall.

The report from Fitch assessed a number of indicators of household vulnerabilities as well as house price valuation measures, which has indicated a record level of household debt.  The high household debt is considered to have come from the rising interest rates as well as the many years of strong house price inflations, not only in the UK but in other countries as well.  New Zealand was rated the top economy that was most vulnerable with Denmark ranked second and UK as the third most exposed.  The reason as to why Britain fell into third was due to the high household net worth and the lower debt servicing costs that helped household finances to be less at risk should prices tumble.  The report from Fitch went on to report that in some economies there was evidence of oversupply with more properties being built than household created with the UK’s new households outstripping the supply of property.

The news for borrowers then is to beware of taking out 100% or more home loans, especially on an interest-only basis, with a view to making money when the property sells. With the current housing situation, households could end up in a negative equity situation. This is not a problem for those looking to sit tight until prices rise again, but is bad news for those tempted to overstretch their credit on cards and cheap loans.

Posted in Borrowing, Consumer Credit, Consumer debt, Debt management, Financial news, Financial products, First time buyers, Homeowner Loans, Homeowners, House buying, Housing news, interest rates, mortgages, Negative equity, Personal debt, Property, Secured loans, UK Finance | No Comments »

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