27/02/2007 by Dave.

In the last three years over six million people in the UK have taken out more debt to help control their finances, a new survey has found.

Debt consolidation helps many people bring together a range of different loans, offering a lower rate of interest than many unsecured loans and credit cards.

More than 2,500 adults were interviewed for the survey, which found around one in seven using some form of debt consolidation.

“Debt consolidation is entirely sensible and a good way to get your finances under control if you owe money to different lenders at varying rates of interest. Theoretically you can reduce your monthly repayments and make your debts manageable,” said Sean Gardner, chief executive of MoneyExpert.com.

“However it only works if you accept consolidation is a wake-up call to get your borrowing under control and then work to become debt-free. There has to be some concern that many people simply see consolidation as a way of keeping on borrowing,” he advised.

A homeowner loan can be an effective way of stabilising your finances, but it is important to pick the best product that will save you the most money.

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23/02/2007 by Dave.

The UK’s consumers are borrowing less on their credit cards and more on their mortgages, according to the British Bankers’ Association.

It appears that as the cost of borrowing has increased people have become more wary of credit card debt, preferring to take a secured loan at a lower rate.

Lending on credit cards dropped by £0.5 billion through January, while mortgage lending grew at £5.6 billion, much the same as the average for the previous few months.

“We can see that the January sales did not encourage borrowing on credit cards. As in the second half of last year, card borrowing is contracting and, with weaker retail sales being reported, this reflects the consumer’s current attitude to spending and their commitments,” said David Dooks, BBA director of statistics.

“Mortgage lending continued to be buoyant, as we expected following the high volumes of approvals in the final quarter of last year,” he added.

A series of interest rate rises have made secured loans more competitive, and with another rise possible within the next few months savvy consumers are looking at the best way to manage their debt.

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20/02/2007 by Dave.

Increasing numbers of consumers are likely to seek alternatives to credit cards, such as secured loans, as providers begin to issue charges on card accounts.Lloyds TSB is to begin charging card-holders a yearly fee of £35 if they do not use their credit cards enough, which could make non-fee charging products like secured and consolidation loans seem more economical.Some 50,000 customers will be subject to the levy, which is designed to encourage customers to use their plastic for purchases.

Sandra Quinn of Apacs told the Daily Mail that card providers “are not charitable organisations. The message is either use your card or cut it up”.

And the news follows a statement by the new chief executive of Nationwide Graham Beale, opining that annual charges on current accounts are likely to be added if the Office of Fair Trading rules to cut overdraft penalties.

But it seems that consumers in the UK are already responding to increased charges and interest rates by moving away from credit cards in favour of other financial products.

“I think the majority of consumers are also very savvy, and last year we saw a lessening in the amount of interest-free periods for new credit cards,” James Ketchell of the Consumer Credit Service said.

“There has perhaps been an increase in fees, and maybe people are starting to realise that using a credit card to make a purchase may not be their best option.”

Secured loans often offer lower rates of interest than credit cards and can prove a more manageable way of consolidating and repaying debts.

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19/02/2007 by Dave.

Last year saw a fall in the average amount of UK credit card debt, according to a Euromonitor study reported in the Telegraph.

The fall in average credit card spending from £1,978 in 2005 to £1,900 last year may have been in part due to consumers consolidating their debts into more manageable payments.

In Britain we remain more indebted than our European cousins, still approaching double the annual spending compared with the EU average.

“UK consumers are now less willing to get into debt on credit cards with high APRs, turning instead to longer-term secured and unsecured loans which offer better value for money,” the research firm stated in the Telegraph.

“Credit card companies are responding to this by implementing savvy marketing strategies. The industry is also coming round to the view that it is cheaper to retain a customer than acquire a new one,” added Euromonitor.

A longer-term personal loan can be one of the best ways to bring your debt under control, offering both a lower monthly repayment and a far lower rate of interest than a credit card.

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18/02/2007 by Dave.

 The number of people seeking advice for their debt problemshas soared by 15% over the past year, Citizens Advice said today.

The charity said its bureaux dealt with 83,000 new debt problems in January, up on the 72,000 recorded last year. It means that nationally the charity could be seeing around 7,500 people every day about their debt concerns.

Citizens Advice said many new queries related to people struggling to meet basic financial requirements, such as fuel and housing costs. It also saw growing numbers of people struggling to pay council tax, telephone debts and water bills.

Director of Policy Teresa Perchard said: ‘Our bureaux are reporting a continuing increase in the number of debt problems people need help with.

‘The combination of people experiencing increases in fuel bills and rising housing costs puts additional pressure on people’s finances which were already stretched to the limit.’

A separate study from the Consumer Credit Counselling Service recorded a 66% increase in the number of debt cases it was dealing with.

Although this was as also due to an expansion its service, it highlights the growing number of people struggling with their debts. The charity reported that between June and December last year, it counselled 50,472 clients, compared with 30,450 people in the same period the year before.

Single people are the most vulnerable, with more than half of those counselled by the CCCS living alone. Half of these were single women, the service said.

These figures were mirrored by Citizens Advice. It reported one single mother with three children was threatened with having her energy cut off because the supplier would no longer accept her minimum payment of £40.

Perchard added: ‘If people have debt problems they must seek help straight away. We cannot stress enough the importance of telling your creditors as soon as you have difficulties in paying – they should treat you sympathetically.’

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18/02/2007 by Dave.

The annual growth in property prices has seen its sharpest month-on-month dip for a year and a half, according to Rightmove.This slowed growth – which analysts believe is caused by the increases in the interest rate – is a welcome sign for property buyers and investors, raising the prospect of sellers being forced to cut their prices.

The new figures show the market’s growth slowed appreciably after January’s interest rate increase to 5.25 per cent; however, the increase may have increased the number of people looking for debt consolidation.

“With prices still at record levels and upwards interest rate speculation, sellers are showing signs of realising that buyers’ resources have a limit. It will be interesting to see if that discipline holds during the spring without a further rate rise, or conversely how both buyers and sellers react to another rise in the coming months,” said Rightmove’s Miles Shipside.

“It also looks like a good call, from a housing market point of view, that the Bank of England has resisted two consecutive rate rises as one increase appears to have struck the right balance so far,” he added.

Interest rates are expected to stay on hold in the near future, as CPI inflation recently fell from three per cent to 2.7 per cent.

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17/02/2007 by Dave.

Many UK consumers may be paying over the odds by opting for car dealership finance rather than a low interest rate car loan, according to online comparison site, Moneyfacts.co.uk. With the new number plates about to be released for 2007, motorists have been urged to shop around for the best deal possible to finance the purchase of their new car.

Whilst many motorists will endeavour to seek the best purchase price for their new car by scouring dealerships and the Internet, many will lose out on any savings made by opting for dealer finance, with typical APR’s of around 10 per cent, which can cost more in the long run than the cheaper unsecured personal loan.

Shunning dealership finance and opting for a car loan can potentially save you more than a £1,000. Those looking to buy a new car have been urged to take advantage of the UK’s increasingly competitive personal loans market.

Speaking on behalf of Moneyfacts, Michelle Slade said: “The market for personal loan business is incredibly competitive, allowing consumers to reap the benefits by means of lower rates.

“Although sub-six per cent loans have become almost extinct, there are still some great deals to be found, charging around six to seven per cent, which is only a 1.75 per cent margin over the bank base rate, and is fixed for the duration of the loan.”

The savings made with a cheaper car loan as opposed to dealer finance, could be used to purchase extras with your new car. As Ms Slade explained: “With a little time spent to secure the best finance deal, you could have paid for extra upgrades such as a climate pack or spoiler.”

However, consumers should bear in mind that when shopping around for a cheap loan, the APR quoted is a typical rate and may not end up the rate you pay.

Ms Slade added: “Around 85 per cent o loans use typical pricing, so bear in mind that the rate advertised may not be the rate you pay, this will be decided by your credit rating.”

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14/02/2007 by Dave.

Many teenagers are content to rack up ‘horrendous’ bills on their credit cards, secure in the knowledge that their parents will pick up the tab, an industry figure asserts.Ben Yearsley, investment manager at Hargreaves Lansdown, was speaking in the wake of a new survey from children’s charity PFEG - which revealed disconcerting attitudes to credit card spending and unsecured debt among school-age teens.With around 25 per cent of teenagers owing money, approximately a quarter of 18-year-olds admit that they shop on credit cards and expect their parents to pick up the bill - despite the comparatively high APRs such products typically charge.

And around five per cent were under the impression that they wouldn’t have to pay back their credit card debts.

Mr Yearsley agrees that there is a problem with unfettered unsecured debt among the nation’s teenagers, saying that “there are so many stories these days in the press about horrendous credit card bills” - an issue that could be remedied were parents to exploit the opportunities afforded to them by secured loans.

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09/02/2007 by Dave.

Consumers are increasingly being pushed into Individual Voluntary Arrangements (IVAs) without understanding the long-term consequences it can have on their finances, a leading credit reference agency has warned.

Experian says IVAs, which are becoming a popular alternative to bankruptcy, can actually damage consumers’ financial futures by having a negative impact on their credit rating.

Richard Fiddis, Experian’s managing director for the UK, Ireland and Northern Europe, said the number of people taking out IVAs rose by more than 150 per cent in the second quarter of this year.

He said this is a very worrying trend and suggests that some consumers, particularly younger people who see an IVA as an easy way out of debt, are being encouraged to enter them even though there may be better options available to them.

“These people tend to be the least financially sophisticated and unfortunately often believe an apparently helpful ‘adviser’ who wrongly tells them that an IVA won’t appear on their credit report or make it more difficult to obtain credit in future, that many of their debts will be wiped out and that they don’t have to tell their employer,” said Mr Fiddis.

“What they don’t realise is that the IVA will appear on their credit report for six years and that it is just as likely that they will struggle to get credit in the future as if they had opted for bankruptcy.”

A debt consolidation loan could prove a sensible alternative to an IVA, allowing consumers to pay off all their debts and replace them with one manageable, monthly repayment.

If consumers are able to pay off a debt consolidation loan and accrue no further debts, they can actually improve their credit rating, unlike IVAs and bankruptcy arrangements which have a negative impact.

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02/02/2007 by Dave.