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Mon 8th Sep, 2008
Posted in Bad Credit, Consumer Credit, Personal loans, Homeowner Loans, Banking, UK Finance, mortgages, Consumer debt, Homeowners, Property, Unsecured loans, Financial news, Housing news, Borrowing, Personal debt, Secured loans, Bankruptcy, Missed payments, House repossession at 11:39 am by admin
In surprise news this morning, the US government has announced that it will bail out America’s two largest lenders, Fannie Mae and Freddie Mac.
Whilst this may seem far removed from the daily grind of most people’s lives, the effect of this action will have far-reaching implications around the globe and already has seen a positive affect on global stock markets.
Most UK homeowners will have never heard of either company, but together they are the largest holders of home loans in the world and as the saying goes, ‘when America sneezes, the rest of the world catches a cold’. In the last year they had been suffering unsustainable losses, as the American home loans market went into freefall and this was a large part of the credit crunch being felt by all.
Once confidence was lost in America, Asian backers stopped investing funds and the resulting lack of liquidity on the loans market has meant that everything from business loans to small personal loans has been affected by a lack of funds to be lent.
With this move - long overdue according to finance pundits - investment into America is likely to restart from healthier financial markets which experts hope will begin to halt the recession which is threatening to sweep the world.
What does this mean to the average borrower? Well, funds are unlikely to rush into the market instantly, but finance is a fast moving beast and so hopes are high that relief will be imminent for Western business and individuals. Particularly in America where an estimated 9% of homeowners are behind in loan repayments, risking repossession, bankruptcy and long term bad credit.
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Tue 15th Jul, 2008
Posted in Bad Credit, Consumer Credit, Personal loans, Debt Consolidation, Homeowner Loans, UK Finance, Credit Card, Consumer debt, IVAs, Unsecured loans, Financial news, Borrowing, Insolvency, Personal debt, Secured loans, Bankruptcy, Debt management, Missed payments at 12:44 pm by admin
The high levels of debt that Britons have built up over the past few years are finally coming back to haunt many households. The impact of the credit crunch is starting to take its toll on borrowers according to experts and it is expected that things are going to get much worse as the year progresses.
The accountancy firm KPMG has said that it is predicting that over 130,000 people are going to be declared bankrupt or enter into individual voluntary arrangements with their lenders. This will be up from the 109,615 who did the same last year.
When people enter into individual voluntary arrangements (IVA) they are allowed to restructure debts such as personal loans, credit cards and hire purchase so that their debts can become more manageable. Monthly repayments are made for a fixed period of time with the remainder of the debt being written off at the end of the period.
It is estimated that as many as 2,500 people have debt in excess of £100,000. In 2007 the average amount owed by individuals entering into IVAs was £50,300.
KPMG found that the average repayment for a loan on an IVA was 38% of debt. The average debtor repaid £19,000 of their debt and as a result £1.3bn had to be written off by creditors.
The high average level of debt indicates just how bad lending has been in the past few years. Most debtors owe so much that they have no realistic way of actually repaying their debt.
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Wed 4th Jun, 2008
Posted in Bad Credit, Consumer Credit, Personal loans, Homeowner Loans, UK Finance, Credit Card, Consumer debt, IVAs, Financial products, Unsecured loans, Financial news, Borrowing, Insolvency, Personal debt, Secured loans, Bankruptcy, Debt management, Missed payments at 12:46 pm by admin
It has been revealed that a rogue debt advisor company, unregulated by any watchdog, has begun to mail out leaflets to people in financial difficulty advising them to default on their loans. The company then offers to step in and help them to become bankrupt.
The company which is called the IVA Council (IVAC) is claiming that thousands of people in debt are each year being poorly advised on how to clear their debt. The IVAC also claims that thousand of indebted customers are being herded into formal debt agreements called Individual Voluntary Agreements (IVA) by creditors.
The company argues that these people should not end up living in poverty desperately trying to clear their debts but instead opt for bankruptcy. The debts could be on mortgages, personal loans, credit cards or utility bills, but the advice is the same each time: default.
The IVAC has mailed thousands of customers of debt advice services across the whole banking sector. The IVAC managed to get these details by buying them off the government-backed agency the Insolvency Service. This has prompted calls for the database to be made less readily available to the public.
Some recipients of these letters from the IVAC have complained that some sensitive information is clearly available in the display in the letter envelope.
IVAC has also set up a website that appears to be an almost exact copy of the Insolvency Service’s website. The company is also allegedly using an old logo of the Department of Trade and Industry (DTI) despite the fact that the DTI changed its name to the Department for Business Enterprise and Regulatory Reform last year.
The truth is that no one can escape their responsibilities and IVAs and bankruptcy are very serious measures that impact upon future credit for many years. They rarely mean that debts can be avoided. Instead the debtor is expected to repay loans and bills at an agreed rate, whilst living on the very same reduced income that this rogue company claims to help avoid.
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Fri 11th Apr, 2008
Posted in Bad Credit, Consumer Credit, UK Finance, Credit Card, mortgages, Consumer debt, Property, Unsecured loans, Financial news, Housing news, Borrowing, Insolvency, Personal debt, Secured loans, Bankruptcy, Debt management, Missed payments, House repossession at 12:15 pm by admin
Despite a large number of warnings that repossessions and insolvencies were on the rise as a result of higher interest rates and the fallout from the credit crunch, recently published figures actually show that the exact opposite has happened.
The figures which were released by the Insolvency Service show that 26,072 people were declared insolvent in the three months after the credit crunch hit. This is a fall of 3% on the number of insolvencies in the previous quarter and a fall of 5% of the same period the previous year.
While the number of bankruptcies had increased by 2.2% on 2006 to a total of 15,833, the number of individual voluntary arrangements (IVAs) was actually down by 14.3% to 10,239. The large drop in IVAs, which allow borrowers to write off some of their debt in return for creating a payment schedule with creditors, could be explained by the fact that most lenders dislike the schemes since they are then forced to write off bad debts. With banks needing to claw back as much money as they can, they are refusing to allow personal loan and credit card customers to ‘go bad’.
While it is not clear which lenders were behind the majority of rejections for IVAs it is believed that Northern Rock is on of the main contributors rejecting all applications for IVAs. This is unsurprising, given its recent history.
HSBC has also changed its policy to IVAs. In the past, repayments for IVAs came in somewhere around 25p for every £1 owed to the lender. HSBC has now upped its threshold to 40p for every £1 borrowed.
As a result of these changes borrowers are now more likely to enter into debt management plans with their creditors.
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Mon 17th Mar, 2008
Posted in Bad Credit, Consumer Credit, Personal loans, Homeowner Loans, UK Finance, interest rates, Consumer debt, IVAs, Financial products, Spending, Unsecured loans, Borrowing, Insolvency, Personal debt, Secured loans, Bankruptcy, Debt management, Missed payments, Overdrafts at 11:53 am by admin
If you find you are having difficulty in repaying your debt one option that is always open to you is to seek an individual voluntary agreement (IVA) from a specialist lender.
Under the terms of an IVA, if you own greater than £15,000 you can try and reach an agreement with your lender in which you only pay back a percentage of the loan or all of it, but the interest charges are frozen.
In the first 3 months of 2007, 11,300 Britons entered into such agreements with their lenders. That is a 50% rise one the same period in 2006 and goes to show how difficult many households are now finding it to deal with debts held in personal loans and credit cards.
However the problem is that now many lenders are taking an increasingly tough line on accepting IVAs. It used to be the case that many lenders would accept repayment on 25% of the loan or debt, however now that figure has gone up drastically and it is becoming increasingly difficult for many borrowers with severe debt problems to even repay their IVAs.
For example HSBC will now only accept an IVA if the borrower agrees to pay back a minimum of 40% of the loan while the student loan company will not allow their debt to be subject to any form of IVA or bankruptcy.
Northern Rock should use its own example when considering individuals in debt crisis. The crisis-hit bank rejects IVAs as standard practice. This is now becoming common practice from many lenders.
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Posted in Bad Credit, Consumer Credit, Personal loans, Banking, UK Finance, Credit Card, Consumer debt, Financial products, Borrowing, Insolvency, Personal debt, Bankruptcy, Debt management, Missed payments at 10:46 am by admin
Imagine you are in the situation where you actually want to pay off all of your debt but your lender will not allow you to. This is a common situation faced by thousands of borrowers across the UK each month.
The problem arises from the fact that in order for many of these borrowers to be able to repay their existing debt they need their lender to freeze the debt they currently have, in effect stop charging interest on their credit card or loan. This will than give the borrower a much higher possibility of repaying the loan instead of going into bankruptcy. If a borrower was to be declared bankrupt, then the bank certainly wouldn’t get all its money back.
In order to freeze debt the borrower must enter into an agreement with the bank. However many lenders do not like to do this as they view these agreements as losing them money – the interest that they make their profit on.
Many borrowers cannot afford to repay any more than the minimum repayments on their credit card each month. This means the possibility of actually clearing their debt is almost impossible, as interest repayments become a larger and larger part of the debt (monthly credit card interest often matches the minimum repayable, so the debt doesn’t diminish).
Applying for an individual voluntary arrangement (IVA) is one way of solving your debt problems. Under these agreements, those owing over £15,000 agree to repay a percentage of all of the money owed typically over a period of five years.
The trick is in negotiating with lenders to freeze interest repayments. This in effect prevents the debt from growing any further. However many lenders refuse to enter into these agreements.
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Thu 6th Dec, 2007
Posted in Consumer Credit, UK Finance, interest rates, mortgages, Remortgaging, Consumer debt, Homeowners, House buying, Spending, Property, Financial news, Housing news, Borrowing, Personal debt, Secured loans, Bankruptcy, Debt management, Missed payments, House repossession at 3:55 pm by admin
Many people are looking at the increase in repossessions in 2007, and considering renovation over relocation. They are choosing to apply for secured loans to renovate and upgrade their home, instead of moving. This may have the desired effect of reducing the national inflation rate.
The government has been working to reduce the inflation rate, hiking interest rates five times in the last year, and promising at least one more interest rate hike within the next six months. This has many homeowners scrambling to make payments on mortgages. Many people have seen their monthly payments increase one or two hundred pounds, even though they have paid down their mortgages.
The Council of Mortgage Lenders reports that repossessions increased by 30 per cent in the first half of 2006, highlighting to first time buyers the potential pitfalls of taking on too large a home loan. Unofficial figures show that they also increased dramatically in the first quarter of 2007.
The cost of moving, upgrading a new home, and a mortgage, is making it impossible for many homeowners’ to move, despite the inflated price of their current home. Many are opting for a second mortgage, or a secured loan, and renovating, hoping that the equity in their property will hold long enough that it will become affordable to move up into a nicer home, or a better neighbourhood.
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Thu 2nd Aug, 2007
Posted in Bad Credit, Consumer Credit, Personal loans, UK Finance, mortgages, Consumer debt, Homeowners, Financial products, Property, Financial news, Housing news, Borrowing, Insolvency, Personal debt, Bankruptcy, Debt management, Missed payments, House repossession at 1:36 pm by admin
A large portion of the people who took part in a recent poll claimed that they could not live on the state pension, and yet they have never saved for their pension. This is leaving many people in dire straights when they retire at 60, and is prompting the government to move the retirement age to 65, and even a possible 70 years old if things do not improve.
The move is to reduce the number of older people who are living dangerously below the poverty line. Today’s 65+ age group are still making mortgage payments. This is something that was not seen a couple decades ago when pension levels were established.
The government wants to protect these people, but at the same time, they are not willing to accept responsibility for paying their mortgages. Reports from charities like Citizens Advice claim that many people are left with less than 50 pounds a week to live on after they pay their mortgages and utilities.
The problem is likely to increase as the banks extend the age limit for lending. They are already lending mortgages to people who will need to live to be 120 years old if they expect to repay the loan. As people age, and their medical demands increase, they will not be able to repay their mortgages or the personal loans secured against their home. This will leave many struggling, or heading to bankruptcy court.
As insolvency levels increase, and the bank of England is preparing to increase the interest rate two more times this year, many pensioners are forced to leave their homes, defaulting on their mortgages, and depend on the charity of their children.
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Wed 25th Jul, 2007
Posted in Consumer Credit, Personal loans, Homeowner Loans, UK Finance, interest rates, mortgages, Consumer debt, Homeowners, House buying, Property, Financial news, Housing news, Borrowing, Insolvency, Personal debt, Secured loans, Bankruptcy, Fraud at 1:29 pm by admin
Many UK borrowers are putting their financial future, and possibly risking jail time, by creating fake payslips. This will let them borrow bigger mortgages and loans, reduce their interest payments, and lower fees.
The Institute of Payroll Professionals (IPP), is seeing an increasing number of websites which now offer ‘duplicate’ payslips, without taking time to check whether the customers information is valid.
These websites cannot legally verify the details provided by consumers looking to buy fake pay slips as the only official parties who would prove salary information - the payroll departments of their employer and the HMRC - are bound by the Data Protection Act,” the IPP website confirms.
This will increase debt and insolvencies as more homeowners are struggling to make payments they cannot afford. Analysts are worried that, if this becomes a wide spread practice, that it will create a false image of the economy as more and more people apply for bankruptcy and IVAs.
Richard Fiddis, Managing Director, at the global information solutions company Experian, said:
“Insolvencies rose by two-thirds in the second quarter of this year, while IVAs, which make up almost half the total, soared by over 150 per cent.”
“One of the most striking differences between those opting for bankruptcy and those for an IVA is illustrated by socio-economic analysis,” continues Fiddis. “Experian’s Mosaic consumer segmentation system shows that people in the ‘Happy Families’ group, comprising largely young families, are more than 60% more likely to be tempted by an IVA.”
These numbers will increase as people continue to ‘fake’ mortgage and personal loan applications.
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Mon 25th Jun, 2007
Posted in Bad Credit, Consumer Credit, Personal loans, UK Finance, Consumer debt, Financial news, Borrowing, Insolvency, Personal debt, Bankruptcy, Debt management, Missed payments at 2:23 pm by admin
Consumers are warned to avoid bad credit loans at all cost. Many of these loans carry fees and interest rates that are so high they can force a consumer further in debt. There is also little proof that they are good tools to repairing a poor credit rating.
Economists warn that these loans are often created by companies who actually expect the borrower to miss payments and therefore allow them to apply extra penalties on top of the high interest already charged. This can lead an existing bad debtor to spiral into a worse credit situation than before.
Missing a loan payment from one of these loans will not only incur high fees from the lender, but it will also damage the borrower’s credit rating.
Consumers rarely measure the impact of a missed loan payment.
Sandra Quinn, of Apacs, states that that missing a single credit card payment is not likely to damage a credit rating, or even be recorded in their credit information report. However, debt management charities warn consumers that the risk of damage is too great.
A poor credit rating reduces the consumer’s opportunity of securing affordable financial products. The consumer will be forced to pay higher interest rates, higher fees, and even higher broker commissions.
Ms Quinn of Apacs stated that missing a payment may not leave a black mark on consumer’s credit report in her response to research from moneysupermarket.com. The website claimed that missed payments can leave the consumer with bank fines of up to £278, the result of losing the zero interest rate, and damage to their consumer’s credit rating, but Ms Quinn disagreed.
“A late payment on its own won’t necessarily damage your credit rating,” she said.
However, Rob Kenley, of moneysupermarket.com, said: “Failing to make a repayment could also have a negative effect on their credit profile.”
What is clear from research though is that consumers who genuinely wish to repair their credit rating and who are prepared to make all their repayments on time will reap the benefits.
“Aside from IVA and bankruptcy, Lenders are most interested in your most recent credit history,” says Abbi Rouse of online loan brokers, Interfinancial Limited. “By showing that you are now a responsible borrower who makes all their payments on time you can repair your credit history.
“If your credit history is currently poor then a bad credit loan is all you will be eligible for now. However, if you want to get a good rating and be eligible for better rates in the future then this is a good way to do it.”
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