Consolidation loans
Consolidation loans
Paying off a number of debts can be made easier by consolidating them into easy, single monthly payments. There are different ways to consolidate loans and debts with varying terms and conditions, but for many people they can be a more affordable and less stressful way of coping with debt.
Having a number of bank loans can be a huge financial burden, with managing separate payments often being a time consuming and costly process. For many borrowers, a consolidation loan can be an easy and cost effective way to bring the debts together under one loan, with an easy to understand and management repayment schedule. Essentially, a consolidation loan will pay off your existing loans, with all the money you previously owed transferred to a single and hopefully more manageable monthly payment. There are different types of consolidation loan, so it’s important to find a type that suits your needs and your budget, and to know exactly how they work.
Managing repayments and spending
One of the first things to do with a consolidation loan is to be careful with your spending. After all of your debts have been consolidated into one monthly payment, it is important to be disciplined and stick to a planned monthly spend, so you can afford the loan repayments. Previously borrowers with a range of loans may have been only making the minimum payments, sometimes just paying the interest added to the debt rather than clearing the debt itself. But by spreading out the debt over a longer period of time, monthly payments can be reduced to a more affordable level.
Your credit rating could be helped by getting a consolidation loan. By paying off the consolidation loan without building up any further debts, it is likely this will have a beneficial effect on your overall credit rating. Loan companies use credit ratings when determining your suitability for borrowing money, and getting a good credit rating can help in the future if you need a loan. Many loans can attract a high rate of interest, especially high street store cards and credit cards, so consolidating these debts into a single loan with a lower rate of interest can save a significant amount of money. Consolidation loans typically have a lower rate of interest as they involve a larger amount of debt, repaid over a longer period of time.
Choosing the right type of consolidation loan
It’s important to understand the difference between a secured and unsecured consolidation loan. A secured loan is usually tied to an asset, normally your property. If you are considered to be a higher risk then the lender could ask that one condition of taking the consolidation loan is that your home is used as guaranteed collateral if you cannot repay the money. You should think very seriously about taking out a secured loan, as if you default on the repayments your house could be taken from you and sold to pay off the debt. If you have a choice between a secured and unsecured loan, it might be preferable to consider the unsecured loan, even if the interest rate on this is slightly higher than on a secured loan.
Debts can be consolidated in a variety of ways – there is no set type of consolidation loan. Some loan companies specialise in comprehensive loans for people with bad debts or low credit ratings. When choosing the type of consolidation that’s right for your needs, it’s best to consider the amount you need to borrow, your credit history, and how much time you’ll need to repay the debt.
It’s also important to consider that if your total debts are not particularly high, then a small short-term personal loan could be adequate for reducing your debt. Going online and looking at the features of loans can get you all the details you need on consolidating your debts. Using a web site for information on consolidation loans can save a lot of time and stress, and give you all the information on interest rates and repayment schedules to help you make a well informed decision.
Economic outlook: Momentum declining, but upswing not in danger
Recent days have had something to offer for both pessimists
and optimists in regard to releases of economic data. At any
rate, economists appear to have divided into two camps in
the past months. On the one side are the optimists, who
make the basic assumption that out of the artificial upswing
induced by anticyclical monetary and fiscal policy, a selfsustaining
upswing is developing and will continue next
year. On the other side are the pessimists, who point to
sluggish lending in the United States and Europe and infer
that at least monetary policy has so far had little positive
effect. Moreover, the pessimists argue that the announced
austerity programs, including especially those in Europe,
might choke off growth and thus cause a relapse into recession.
As evidence for this, they cite the halting development
on the US labor market or the disappointing development of
US private housing and commercial property.
In our opinion, the truth lies, as is so often the case, somewhere
in the middle. It can scarcely be disputed that a
self-sustaining upswing with remarkable momentum has
been observed, but it is equally true that not all the data
now available put the world in a rosy light. On the other
hand, it is fair to ask when an economic upswing has ever
been accompanied by exclusively positive news and outlooks.
There have always been impeding factors, and all
good things come to end.
It is therefore a little surprising that in recent days, the fly in
the ointment has been sought in the economic indicators,
when in principle the released data were positive. A good
example of that is the Ifo index.
Perhaps Europe’s most important leading indicator, the Ifo
index has increased again in June and now also reached a
high index value compared with its own history. Many
commentators nevertheless warn that the expectations component
has fallen despite an impressive rise in the rating of
current conditions. This picture was repeated upon the
release of the PMI indexes for Europe’s manufacturing and
services sectors. Instead of acknowledging that the indexes
show impressively high levels significantly above the crucial
50-point threshold, the complainers point to a marginal
decline in relation to the preceding month. The same was
also true, by the way, of the Belgian National Bank’s important
leading indicator (BNB index) and of French business
sentiment. On the other hand, little or no notice has
been taken of the fact that German business sentiment has
in June also seemed largely unimpressed by the gyrations
on the markets, the debt crisis in Europe, and the debates
over the austerity packages. Even a growth rate for industrial
orders in the euro area of 21% compared with the yearearlier
month has not aroused any enthusiasm, although that
is the highest growth rate in the last ten years.
We have the impression that as a result of the recent crises
and gyrations, too may market participants have become
conditioned to seek only the “critical points” for any state
of affairs. That may be understandable given the experience
of recent years, but in the long run it does not yield a successful
asset allocation, when for an analyst or portfolio
manager the glass is always half empty and never half full.
So, it may now be that economic momentum has reached or
even passed its peak, but that certainly does not mean that a
slide into the next recession will now inevitably begin.
Instead, the past shows that after stormy economic upswings,
the economy is often able to grow for years near the
rate of potential growth without the next downswing occurring
immediately. In the language of an airplane pilot, one
could say that the economy has now reached its cruising
speed and altitude, after takeoff was accomplished with an
exceptionally great amount of thrust. However, there is no
reason, in our view, that the cruising elevation must already
be left again soon.
Of course, it cannot be rationalized away that the austerity
packages will have a negative effect on growth, especially
in Europe. However, we already pointed out some weeks
ago that, for example, the German “austerity package” (the
name is somewhat misleading because the package really
consists to a considerable extent of tax hikes) will not have
any dramatic influence on growth because of both its size
and its structure.
The Cooperative bank
I opened an account with the Cooperative bank about six months ago, I got fed up with the other major uk banks as they were not being very understanding during the harsh times and relied only on a computer credit score to assess your eligibility for lending. So I opened a privilege bank account with the COOP which was probably the best banking move I have done so far, they have a sort of systems that assess you internally regarless of your credit profile with the major credit reference agencies like experian which sometimes make mistakes and have the wrong information about you.
I was trying to look for a loan to consolidate my other credit cards that have run out or 0% transfers and purchases, now the credit card companies were charging on average 20%-30% on the balances, I started struggling keeping up with the high interest payments and was getting very stressed.I have tried my other bank First Direct which has a very good customer service but they also depend on outside agencies to judge your financial position, so could not get a loan from them. When I rung the COOP they advised me that they could offer me a £10k loan because I have maintained my account properly and have shown that I can manage my finances properly and will lend me without having to go to credit agencies. I was thrilled as I paid off the high interest credit cards and can manage my budget every month properly and being self employed it makes life much simpler.
EFG Backed Loan Application Process
How does a business apply for an EFG backed loan?
Step One – Evaluation of Borrowing Proposal (Assessed by Participating Lender)
EFG Applicants will potentially need to provide all the information normally required by a lender in connection with a loan application, typically including:
business plan, including details of the purpose of the loan and details of other borrowings of the business
Suite of financial information – to include historic trading figures, management accounts and financial projections
details on any other publicly funded support received by your business within the past three years
Step Two – EFG Eligibility Criteria Check (Assessed by Participating Lender)
Small businesses in the UK with an annual turnover of up to £25 million
Borrowing requirement of £1,000 – £1million
Term of loan is minimum 3 months, maximum 10 years
Unable to provide any or sufficient additional security to the Lender
Most sectors are eligible. The principal exclusions relate to businesses in the coal, real estate and insurance sectors. Your lender will advise if any of these restrictions affect your business when they consider your loan application.
Is the borrowing for one of the EFG eligible purposes (as detailed in the EFG Questions & Answers)
After assessing the above two areas, the Lender will then advise you on whether your business is eligible for an EFG backed Loan. Please note that Lenders may ask for additional security in conjunction with the granting of an EFG backed Loan.
Cost to Your Business:
In addition to regular capital and interest payments to your lender, plus any arrangement fee which they may charge, a premium is also payable to BIS.
The premium is equivalent to two per cent per annum on the outstanding balance of the loan, assessed and collected quarterly in advance throughout the life of the loan.
A discount of 25 per cent will be applied to all premiums due and successfully collected during 2010.
Enterprise Finance Guarantee
The Enterprise Finance Guarantee (EFG) is a loan guarantee scheme aimed at facilitating additional bank lending to viable SMEs with no or insufficient security to secure a normal commercial loan. It was launched in January 2009 to help viable SMEs obtain the working capital and investment that they need during a time of unprecedented tightened credit conditions. EFG is a targeted measure and is not designed for the majority of viable businesses to whom banks should lend; nor is it intended for businesses who are not viable and that banks are rejecting on that basis.
EFG is available until 31 March 2011.
EFG supports lending to viable businesses with an annual turnover of up to £25m seeking loans of £1,000 through to £1million and is available to businesses in most business sectors.
However, EFG is subject to certain sector restrictions arising from the EU De Minimis State Aid rules, the Industrial Development Act 1982 (which provides the statutory basis for EFG) and also for national policy reasons
Types of EFG Facilities Available
Under EFG, the following facilities can be guaranteed, repayable over a period of between 3 months and 10 years until otherwise indicated:
- New term loans
- Refinancing the existing term loans, where the loan is at risk due to deteriorating value of security or where for cash flow reasons the borrower is struggling to meet existing loan repayments
- Conversion of an existing overdraft into a term loan to meet working capital requirements
- A guarantee on invoice finance facilities to support an agreed additional advance on an SME’s debtor book. This will supplement the invoice finance facility already in place. (Available for terms up to 3 years)
- A guarantee on new or increased overdraft borrowing for the SMEs experiencing short term cash-flow difficulties. (Available for terms up to 2 years)
An EFG lender may not necessarily offer the full range of lending provided for under the EFG rules if to do so would be incompatible with their normal commercial lending practices.
Application Process
Businesses may choose to approach one or more of the 44 participating lenders to discuss their borrowing needs.
The lender will typically assess the business against their normal commercial lending criteria for instance with regard to the viability of the business, ability to service the loan repayments, and availability of existing security, in order to determine which form of lending, if any, is most appropriate.
Where a lender determines that use of EFG is appropriate, each lender (usually via the lender’s central EFG processing team), is provided with access to the EFG web portal through which they administer the EFG eligibility criteria, and through which they can check EFG eligibility at any point in the loan application process. An overview of the EFG application process is available here.
However, there is no automatic entitlement to receive a guaranteed loan and nor is there any pre-qualification process for it. Decision-making on individual loans is fully delegated to participating lenders and are made on commercial terms. BIS plays no role in the application or decision making process.
The Government Guarantee
By providing lenders with a Government backed guarantee for 75% of the loan value, we are facilitating lending that would otherwise not be available. EFG is intended to support loans to businesses that can ultimately repay the loan in full, and not intended to provide protection to the borrower in case of default.
In return for the guarantee, the Government charges the borrower a premium equivalent to two per cent per annum on the outstanding balance of the loan, and is assessed and collected quarterly throughout the life of the loan. However, any fees, interest rates, other charges made by a lender are a matter for the lender concerned.
Personal Guarantees / Security
EFG allows lenders to take an unsupported personal guarantee on an EFG backed loan for up to the full value of a loan. In guaranteeing the loan, the taxpayer is taking a risk, so it is right the risk is shared by the lender and the borrower, as it would be for any commercial loan.
Lenders are not permitted to take a direct charge over a principal private residence for a new EFG backed loan. However, the EFG rules only apply to that portion of any loan or facility guaranteed under EFG. It does not apply to any non-EFG lending.
Enterprise Finance Guarantee: Further help
The delivery of EFG , including the decision on whether or not it is appropriate to use it in connection with any specific lending transaction, is fully delegated to the participating lenders. Capital for Enterprise Limited manages the operation of EFG on behalf of the Department.
Business Link can provide information and advice to businesses seeking finance including under EFG. For an initial appraisal on whether your business may be eligible for the Enterprise Finance Guarantee go to the Business Link website.
For Lenders – Individuals within a participating lender should contact their central processing team or other designated internal EFG expert who can obtain further information from CfEL.
For Businesses – All decisions relating to the use or otherwise of EFG in individual cases is fully delegated to the participating lenders. Businesses are advised to approach a number of the participating lenders to discuss their borrowing needs. Businesses that receive an EFG backed loan should discuss any resulting EFG issues with their lender, including issues relating to premium collection or refunds.
Please note that neither BIS nor Capital for Enterprise Ltd (CfEL) can advise on individual eligibility queries. Nor will BIS or CfEL intervene in the commercial relationship between Borrower and Lender in the event of disputes. Customers dissatisfied with the experience of dealing with their bank should raise their concerns initially through the bank’s own customer complaints procedure.
If the matter is not resolved businesses with a turnover of under £1 million have the option of taking their complaint to the Financial Ombudsman Service or on 0845 080 1800. Larger businesses might wish to seek legal advice if there is a contractual dispute. Alternatively customers always the option of seeking support from other lenders.
Enterprise Finance Guarantee: List of Lenders
Airdrie Savings Bank
Allied Irish Bank
Bank of Baroda
Bank of Cyprus UK
Bank of Ireland (NI only)
Bank of Scotland
Barclays
Big Issue Invest
Bolton Business Ventures
Braveheart Investment Group
Business Enterprise Fund
Business Finance Solutions
Capitalise Business Support
Centric Commercial Finance
Close Brothers
Clydesdale Bank
The Co-operative Bank
Cumbria Asset Reinvestment Trust
Davenham Group
DSL Business Finance
Donbac
East London Small Business Centre
First Trust Bank (NI only)
Foundation East
GE Capital
GLE oneLondon
HSBC
IGF Invoice Finance
Lloyds TSB
NatWest
NEL Fund Managers
Northern Bank (NI only)
The Royal Bank of Scotland
Santander Corporate Banking
Skipton Business Finance
SME Invoice Finance
South West Investment Group
State Securities
Triodos Bank
UK Steel Enterprise
Ulster Bank (NI only)
Venture Finance
Whiteaway Laidlaw Bank
Yorkshire Bank
More use equity release to help relatives
More use equity release to help relatives
The number of retired homeowners using equity release to help cash strapped family members has nearly doubled over the past year, according to market research published on Wednesday.
Equity release schemes allow older borrowers to unlock cash from their homes with the debt, plus interest, only repaid when the borrower dies or goes into a care home.
But instead of using the funds for themselves, 35 per cent of those taking out equity release schemes in the first quarter of this year used the cash to help a family member, according to a market report by Key Retirement Solutions.
This figure compared with 19 per cent in the same period in 2009.
“It is striking that pensioners are more confident about using their wealth to benefit others rather than having to use the money for themselves,” said Dean Mirfin, business development director at Key Retirement Solutions.
“Despite falls in property values over the past couple of years many find that they can comfortably raise the amounts they need from the current wealth tied up in their homes.
The report, based on the KRS’s own and industry data, found that home and garden improvements remained the most popular reason for equity release loans.
Just under a quarter of pensioners were using equity release funds to pay off non mortgage debts. Nearly 20 per cent used cash from equity release to pay down their home loans.
The average amount released dropped slightly from £45,000 in Q1 of 2009 to £43,000 in the same period this year, the report found.
The figures also showed an increase in popularity of equity release schemes which allowed borrowers to drawdown on their funds, rather than take funds as a lump sum.
The figures collated by KRS also showed a big increase in the numbers taking out equity release plans, in spite of the fact that at least six big name providers had withdrawn from the market over the past year.
Those considering equity release are advised to seek independent financial advise as as equity release can impact on entitlement to state benefits and the value of an estate left to children and other beneficiaries
How to avoid higher home repayments
With inflation figures showing further price increases, homewowners who are worried that interest rates will rise this year are now being offered mortgage deals that can protect them against higher repayments. Brokers are recommending a range of options:
Split loan deals
From Monday, HSBC will offer borrowers the option of a split loan mortgage that allows customers to fix either 25, 50 or 75 per cent of their loan, with the remaining percentage on a lifetime tracker rate. The fixed rate depends on the proportion of the mortgage that is fixed and the loan-to-value of the deal. Rates start from as low as 2.49 per cent for the 25 per cent fixed option at 70 per cent loan-to-value. The product has a £999 fee and is available to customers borrowing up to £500,000.
“The rates on offer look very good,” said David Hollingworth of London & Country Mortgage Brokers.
Mortgage brokers point out that many other lenders will allow borrowers to mix and match products and specify the split between fix and tracker. “However, you do need to watch out for the fees charged and check whether a fee is payable on each element of the loan,” said Hollingworth.
Switch and fix deals
Otherwise known as a “drop-lock” mortgage, these products allow borrowers to take out a tracker rate but then move on to a fixed-rate deal – with the same lender – without any early repayment charges.
Nationwide Building Society and Royal Bank of Scotland (RBS) are among the few mortgage providers that currently offer the switch-and-fix option. However, Nationwide charges a reservation fee for the new fixed rate while RBS allows customers to switch free of charge provided they have been on the tracker for at least three months.
Nationwide has a two-year tracker at 2.68 per cent – bank rate plus 2.18 per cent – available up to 70 per cent loan-to-value. RBS has a two-year tracker at 2.59 per cent – bank rate plus 2.09 per cent – at up to 60 per cent loan-to-value.
The potential downside is that the lender’s fixed rates are likely to have risen by the time the borrower decides to switch.
Capped rate mortgages
A capped rate mortgage is another option that limits a borrower’s exposure to rising rates. Capped rates cannot climb above a pre-set rate, known as a cap.
Brokers recommend a capped rate for about five years. Britannia/Co-op has a five-year deal at 2.99 per cent – bank base rate plus 2.49 per cent – with a cap of 5.99 per cent available up to 75 per cent loan-to-value. It comes with a £999 fee.
“The best five-year tracker rate at 75 per cent loan-to-value is 2.84 per cent from ING so a borrower will not pay much of a premium – just 0.15 per cent – to have the security of the cap,” said Nigel Bedford of Largemortgageloans.com.
Interest rate insurance policy
RateGuard is an insurance policy offered by insurer MarketGuard that pays out a monthly sum if rates rise above a certain amount.
Premiums are set according to the size of the mortgage and the rate insured. For example, protecting a £500,000 repayment tracker mortgage against a rate rise of more than 1 per cent costs £193 per month with a two-year policy. This drops to £55 per month if the policyholder wants to protect the same mortgage against a rise of more than 3 per cent.
Brokers warn this option is likely to be the most expensive
USA: Mortgage Delinquencies – Delinquencies and Foreclosures Rise Again
Actual: 10.06%
Previous: 9.47%
Delinquencies and Foreclosures Rise Again
Data just released by the Mortgage Bankers’ Assn show that more than one-tenth of all US mortgages are delinquent, a new record high. Homes in foreclosure edge up slightly as well. One caveat: the increases are driven by seasonal adjustment, which should probably be taken with a grain of salt given the huge shifts in this sector over the past few years.
Mortgage delinquencies: 10.06% in Q1 (Q4: 9.47%).
Mortgages in foreclosure: 4.63% in Q1 (Q4: 4.58%).
KEY POINTS:
1. The Mortgage Bankers’ Assn Q1 report shows a further rise in delinquent mortgages, even in the 30-60 day range, somewhat surprising given the improvement in the economy and labor market in recent months. The increases are spread among both fixed and adjustable-rate mortgages, both prime and subprime; only FHA mortgages saw a lower delinquency rate than the prior quarter. One issue here is that the delinquency figures incorporate a positive seasonal adjustment, which should probably be taken with a grain of salt given the seismic shifts in this sector over the past few years (in fact, the MBA itself notes this issue; see http://www.mbaa.org/NewsandMedia/PressCenter/72906.htm). Before seasonal adjustment, the figures generally show improvement.
2. New foreclosures continue at a substantial rate of 1.23%, the 9th consecutive quarter where at least 1% of mortgages went into foreclosure. The total inventory of foreclosures (non-seasonally adjusted) rose to 4.63% of the stock of housing in the MBA’s survey (just over 2 million homes in foreclosure).
Debt Support
We offer confidential and impartial debt help and advice
Make an enquiry today for help and advice. Why not speak to one of our experienced advisors today for no obligation advice on how to become debt free.
With over 10 years debt experience and over 70 specially trained debt advisors, we can help you with anything from small loans, to our expert, affordable debt help solutions. Apply now and speak to one of our expert advisors and see which solution is best suited to your circumstances.
How Can We Help?
In the last year, we have dealt with over 100,000 enquiries
On average we have saved our customers upto 40% off their monthly repayments
We have over 10 years experience in the financial services industry
We have over 70 specialised staff to help you no matter what the purpose
We can help you even if you have had previous bad credit or CCJs, or have been refused credit altogether
We offer you free, no obligation advice, on a variety of finance related matters
It’s really quick and simple to apply now online and one of our friendly, helpful advisors will call you back and explain how we could help.
We’ve already helped thousands of customers, so we could help you – even if other companies have let you down in the past!
For more information please call us free on 0800 228 9893
Debt Management UK Debt 24
0800 015 7557
24 Hour Debt Solution
- Government Backed –
- Unaffordable Debt Written Off -
- A Debt Free Future
INTEREST STOPPED OR FROZEN
*
WRITE OFF DEBT YOU CAN’T AFFORD
*
AFFORDABLE MONTHLY PAYMENT
*
AVOID HOUSE REPOSSESSION
*
DEBT STRESS GONE IN 24 HOURS
*
IVA
*
DEBT MANAGEMENT
*
DEBT CONSOLIDATION
*
Get your life back on track TODAY
*
Tenants or Homeowners
