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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 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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Wed 13th Jun, 2007
Posted in Bad Credit, Consumer Credit, Personal loans, Debt Consolidation, UK Finance, Credit Card, mortgages, Consumer debt, IVAs, Spending, Financial news, Borrowing, Insolvency, Personal debt, Bankruptcy, Debt management, Missed payments at 12:09 pm by admin
Credit Awareness week is the brain child of Credit Today magazine, Experian, the British Bankers Association, and the Consumer Credit Counselling Service. It has been brought about to highlight the fact that half of all adult Britons admit that they have made serious financial mistakes and have little or no financial control.
CreditExpert.co.uk reports that 80% of consumers regularly overspend without concern, and eventually, millions will face bankruptcy. Many people even understand that this is the direction they are heading, but do not take preventative measures.
Financial mistakes such as cheap consolidation loans with long payback periods that are thousands of pounds higher than needed, so you can take a vacation, or splurge a little, are at the heart of the problem.
Terms like “therapy spending” are some buzzwords these consumers use to justify their spending habits.
At least 5% of consumers are thinking about escape through individual voluntary agreement (IVA) or petitioning for bankruptcy.
Do it yourself debt management can compound the problem. One in 10 have used a credit card to pay off debt on another card. At least 10% of the people polled have missed repayments on credit cards, loans or mortgages.
Jim Hodgkins, managing director of CreditExpert.co.uk, said: “The number of people who admit to making basic financial mistakes and even considering quick fix solutions like taking out an IVA is worrying.
“What this research seems to expose is a serious lack of understanding of the long-term consequences of these actions and how it can affect your credit rating and ultimately impact on your financial future.”
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Tue 12th Jun, 2007
Posted in Bad Credit, Consumer Credit, Personal loans, Banking, UK Finance, interest rates, mortgages, Consumer debt, IVAs, Financial news, Borrowing, Insolvency, Personal debt, Secured loans, Bankruptcy, Debt management at 10:11 am by admin
The experts predicted that insolvencies would rise to 30,000 in the first three months of 2007.
Britain’s consumer debt crisis statistics showed a near 50 per cent increase in the number of people taking out Individual Voluntary Arrangements (IVAs) in the first three months of 2007.
The total number of IVAs rose 47.6 per cent to 13,233 compared to 9,000 in the same period last year. Bankruptcies increased 10 per cent to 16,842. In Scotland, the number of individual insolvencies rose 12 per cent.
Politicians attacked Gordon Brown’s record and claimed that figures “tell us a lot about Gordon Brown’s poor management of Britain’s finances. An economy built on debt is not an economy built to last.”
The Liberal Democrat’s treasury spokesman, Vince Cable, added: “These figures equate to more than 300 people being declared insolvent every day - a truly astonishing number. But these are not freak figures. Sadly, they are likely to get even worse, especially with families feeling a further pinch on their budgets when interest rates almost certainly rise.”
Economists have predicted that repossessions will start to increase dramatically in the next few months, especially if the Bank of England continues to increase interest rates to the pessimistic 7% some economists claim. Already lenders are seeing a drop in the number of people applying for loans and other credit.
The increases in interest rates, and the finance companies elimination of affordable fixed rate plans, will make it more difficult for many consumers to repay their mortgages and secured loans.
Economists believe that the insolvencies will continue to rise, and might breach the 150,000 mark by the end of 2007.
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