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.
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
To Budget or not to budget
I think the most painfull thing about cutting down on expenditure is not being able to keep up or having to downgrade yourself with the Jonesses you are used to hanging out with because you suddenly have less income. The jonesses being your colleagues, school mates, or just your buddies. Not being able to do something that with them that you have been regularly doing is probably the most painfull.
It is more disturbing than having to sell your material possessions. Jack (not his real name) was lately put in that position, to sell his sports car, or sacrifice the outings with the mates. He sold the sports car. The only problem is he still don’t have enough to hang with the mates and go on their trips. What happens when you came clean and tell your friends you have financial problems or debt problems, one or two might help, the reality is others will not want to know. At the back of your head you know these are not really your real friends but your good time friends, but yet we find it instinctive to want to be part of that heard and have enough money to be part of that herd. It is basic human nature to want to be in the crowd, with the herd you think you belong to. It is sometimes called peer pressure as well.
Finances and income should never be gambled to be part of the herd or that social circle. You need to retrain yourself to enjoy other things or submerge your self in work to come back financially on par with the circle you want to be with it.
Jack said he constantly felt pressured when it came to his round, but yet he did not want to leave the circle and this put him into a more downward spiral. He said it would have completely different if he was not there in the first place. Now society knew who he was, what he was, he had gained the respect, he did not look for it, but gained it, loosing it was something he could not face.
So I gave him a solution, lie, yes lie, just say you were busy and cut down the frequency you met them, that way you will not loose he respect and you could still be part of that social circle, but much more less frequent. You can still have your self esteem while you worked to regain your financial independence. After you have stopped joining them for all their parties and excursions, you will eventually not miss it and cam begin to enjoy your own company gain. When you do go our
Budget on other pleasurable activities, buying gifts for freinds or relatives, you will be amazed how much you can spend on totally unncessary items. If you are broke, say were busy at work, and send your relatives or friends a card.
Student Debt
More than half of students in Scotland have borrowed from commercial lenders such as banks or credit card companies, according a survey.
It suggested 70% spent more than the recommended 10 hours a week in paid work to fund their studies.
The National Union of Students in Scotland, which questioned 6,217 people, called for the government to improve financial support.
The Scottish Government said it had already taken steps to help students.
The survey indicated 52% of students had used commercial lenders, 67% owed money to family or friends, 61% had taken out student loans and 31% owed money to all three.
While historically low interest rates had helped with repayments to the Student Loans Company, which runs the student loan scheme, interest rates with other lenders remained comparatively high
The survey claimed 44% of university graduates, 38% of postgraduates and 31% of college students considered commercial loans their “biggest concern”.
Claire Rackley, 23, who has just completed an HNC in legal services at Stevenson College in Edinburgh, borrowed £3,000 on a credit card in addition to a £1,000 overdraft and a student loan.
As well as full time study, she works 16 hours a week in a bank to try to pay off her debts.
“I do worry about money constantly,” she said.
“I have had to take time off work due to stress. The thing I most look forward to is getting my student loan through so I can stop using my credit card but the minimum repayments eat up my income so I end up spending again.”
The NUS said it wanted the government to increase the minimum student loan available, increase the value of grants to poorer students and introduce a “Summer Holiday” grant to help students through the summer break.
‘Most worrying’
Claire Baker, Labour’s further and higher education spokeswoman, said the results were depressing.
“This survey makes clear that it is borrowing from credit cards and bank loans that are the most worrying for students, and likely to be most damaging for their studies,” she said.
“Equally it’s clear that it is those from poorer backgrounds that are struggling the most which I find very worrying indeed.
“It’s clear that tackling commercial debt and student hardship must now be the priority for the government.”
The Scottish Government welcomed the NUS contribution to its consultation on the future of student funding.
Responding to the report, SNP MSP and Education Committee member Aileen Campbell said students had already been helped by the abolition of the £2,000 graduate endowment fee.
She added: “To tackle student debts the SNP has restored the principal of free education, increased hardship funding, reintroduced grants for part-time and post graduate students and has invested support in independent learning accounts to help Scottish learners fulfil their potential.”
Students from 18 higher education institutions and 21 further education colleges took part in the survey.
Marriages and Bankruptcies
The over-45s are experiencing the biggest rise in bankruptcies as multiple marriages and falling house prices take their toll on people’s finances, it was claimed today.
The number of individuals in that age group going bankrupt increased by 124% between 2004 and 2008, rising from 10,600 to 23,800, according to research by accountancy firm Wilkins Kennedy. Over the same period the total number of bankruptcies rose by 89% to 67,500.
The firm, which analysed figures from the Insolvency Service, said an increase in second and even third marriages was a factor. One in five people divorcing in 2007 had a previous marriage ending in divorce compared to just one in 10 in 1980.
Anthony Cork, director of Wilkins Kennedy, said: “By the time people hit 45, many will have established a second or even a third family with additional numbers of children and ex-wives or ex-husbands to support financially.
“This could mean people are having to help pay off part of the mortgage for their ex-husbands’ or ex-wives’ home, contributing to expensive child care and maintenance costs whilst paying for a second set of school fees and mortgage payments from a new marriage.”
Cork added that recent double-digit falls in house prices meant those who had previously turned to their homes for finance in times of crisis were now finding they had less equity or were unable to remortgage.
“The property boom saw a lot of people remortgaging their houses to cash in on the rising value of property, but with the crash many people now haven’t got much equity, if any, to rely on if they are made redundant or if their incomes fall.
“The problem may get worse if property prices continue to fall and unemployment continues to rise.”
Working Adults in Poverty
The numbers of working adults struggling below the poverty line has jumped by 10 per cent, figures released today show.
The latest government statistics reveal the startling rise in the number of adults who are struggling to make ends meet in the wake of the global financial crisis.
The Department for Work and Pensions’ Households Below Average Income (HBAI) report shows there are now 5.6 million working-age adults below the poverty line.
Between 1998/99 and 2007/08 the number of working age people in poverty has risen by 600,000, the report said.
But the report also found large reductions in the levels of persistent poverty – households judged as being below the poverty line for three or more of the last four years – among children and pensioners since 1998.
There are now 2.5 million pensioners living in poverty which represents a marginal fall of 200,000 since 1998, according to the report.
But in the population as a whole it found 11 million people were living in poverty – a figure which has risen by 300,000 since 2006.
Pensions Minister Rosie Winterton said the government has lifted 900,000 pensioners out of poverty and the income of the UK’s pensioners was increasing.
‘In 1997 UK pensioner income was well below the European average. Today their income is 9 per cent higher than the EU average,’ he said.
Today’s National Statistics figures also show there are still 2.9 million children living in poor households, and a rise of 100,000 families living on a low incomes.
Fiona Weir, Chief Executive of Gingerbread said such figures made for, ‘depressing reading.’
‘Many of the 2.45 million single parents and their children, struggling on in poverty, will feel today exactly the same way as they felt yesterday and will do tomorrow – trapped and forgotten,’ she said.
‘When we talk about households in poverty, we mean parents who can’t afford to buy shoes when a child’s feet have grown.
‘We are talking about single parents who struggle with food bills and are living in a situation where something unexpected like a broken fridge or extortionate bill can push the family into debt, and potential eviction.’
Financial Secretary to the Treasury, Stephen Timms said that in the recession, the short term focus does would be on maintaining and safeguarding employment.
‘We have been very clear that the best route out of poverty is having a job hence the emphasis in the budget on employment,’ he said.
Personal Bankruptcies in the UK
A disturbing picture of ‘Broke Britain’ has emerged as personal bankruptcies soared to a record high and company failures leapt 56 per cent.
Some 19,062 people were declared bankrupt during the first three months of the year – 23.4 per cent more than during the same period of 2008.
The increase is a legacy of a ten year reckless lending spree by the nation’s banks which are now getting tough with customers who fall behind on repayments.
The banks themselves point the figure at customers who borrowed and spent beyond their means and now see bankruptcy as an easy way out.
The total number of people who became insolvent, including those who entered debt repayment plans known as Individual Voluntary Arrangements (IVA), hit 29,774.
Experts expect the number of personal insolvencies to continue to increase during 2009, to reach a record 150,000 for the year, well up on the previous high of 107,000 in 2006.
The figures, published by the Insolvency Service, also showed a steep annual increase of 56 per cent in the number of companies going into liquidation.
The total of 4,941 for the first three months of the year was a 16-year high.
The figures represent the fall-out of a consumer spending boom of the past decade fuelled by debt
Director of personal insolvency at KPMG, Mark Sands, said: ‘Despite the credit crunch, levels of consumer debt in the system remain at record levels.
‘Combined with the highest unemployment levels since 1997 and rapidly increasing negative equity, it is no surprise that we are seeing the highest levels of personal insolvencies since records began.
‘Whilst consumers will fight to keep their jobs and their family homes, for those who lose both there is often little reason for someone with debts and minimal assets not to declare themselves bankrupt.’
He added that Debt Relief Orders, a new alternative to bankruptcy for people with debts of less than £15,000 and little surplus income, would further push up the number of people declared insolvent in future quarters.
The orders became available last month, and will be included in the statistics from the second quarter.
Howard Archer, chief UK and European economist at IHS Global Insight, said: ‘Unfortunately, individual and corporate insolvencies are set to rise markedly further as the recession bites hard.
‘Deep and extended economic contraction, soaring unemployment, heightened debt levels, sharply reduced house prices and more and more people being trapped in negative equity seems certain to exact an increasing toll over the coming months.’
Pat Boyden, personal insolvency expert at PricewaterhouseCoopers, said: ‘We expect to see the trends continue, particularly the rise in bankruptcies, as the recession bites.’
He added that in the 1990s recession, bankruptcies continued to increase for nearly three years after the worst of the recession had passed.
He said: ‘If that is the case this time, we may be seeing record figures every quarter until 2012.’
The Insolvency Service warned both individuals and company directors against abusing the system by running up big debts without any intention of repaying them.
Its chief executive, Stephen Speed, said: ‘For those individuals who have no prospect of being able to repay their debts in full, bankruptcy represents a means of relieving the financial pressures, allowing debts to be written off after one year and giving the debtor the chance to start again having learnt the lessons from their experience of living with debt.
‘However, bankruptcy must not be seen as an easy option for those who have contributed to their own problems.
‘There are sanctions for those bankrupts whose behaviour can be seen as reckless, wilful or culpable and where debtors can pay something towards their debts, The Service will ensure that they do pay.’
There are concerns that some company directors have amassed big debts, put their firm into liquidation and then relaunched their business under a different guise almost immediately.
Mr Speed said: ‘ It is important that the public can have confidence that corporate insolvency procedures are not open to abuse.
‘Where company directors are found to have been guilty of misconduct they can be disqualified from acting as a director in the future.
‘Currently, some seven directors a day are disqualified as a result of investigations conducted by the Insolvency Service.’
Credit Blacklist
There’s no such thing as a credit blacklist and lenders don’t take account of your race, gender or religion. Neither will lenders refuse credit because of where you live or who lived at your address before you.
You’re more likely to be rejected because you don’t meet the criteria set by an individual lender. These could include the amount you earn, the amount of credit you already have and how many applications you’ve made in the last few months
Does your other half know your guilty financial secret?
Does your other half know your guilty financial secret?
Almost everyone believes that openness about finances is important to a relationship. A new survey from CreditExpert.co.uk reinforces the point, with most British adults agreeing. But the true facts show a very different story.
Almost one in five adults in a relationship admits they haven’t told their partners what they owe – which means that they are hiding up to £30 billion of debt!
Ten per cent have even set up a secret bank account that they keep to themselves, while 15 per cent, aren’t telling their partners the true level of their earnings or bonuses and another ten per cent make secret purchases from joint accounts.
Peeking at the paperwork
Perhaps not surprisingly, more than a quarter of those in a relationship have decided to take their partners’ financial honesty with a pinch of salt and sneak a look at their bank statements or pay slips on the sly.
CreditExpert director Darryl Bowman says, “If you have something to hide, you might want to consider that one joint application for credit with your partner creates a ‘financial association’ on both of your credit reports and that means your financial behaviour could impact your partner’s finances, including their ability to get credit. Couples should be honest about money, particularly if you are already financially linked and if you plan to have joint accounts in the future.”
“A simple way of finding out if you are financially linked with anyone is to look at your credit report. If you find someone else’s name, their financial track record could affect your chances of getting credit.”
Don’t avoid the truth
Many of us don’t like to face up to what’s happening, ten per cent of the survey’s respondents say they are ashamed of their finances, with an equal number worried about how their partner would take it if he or she knew their true financial situation. A lot of those people might well be among the 4.2 million of us – who have hush-hush credit or store cards their partners don’t know about.
And some of those will be among those so stressed by current economic circumstances that they are clamming up about their finances. One in 20 report that their last relationship failed because of their partner’s lack of frankness about money.
Are your debts out of control Dont ignore the warning signs
If you developed a strange rash that just wouldn’t go away, you’d visit your doctor – but it’s amazing how many people who listen to health warnings don’t do the same when it comes to wealth warnings.
Now more than ever, it’s crucial to monitor your debt levels to prevent a slide into the financial mire – before you’re in so deep that getting out seems almost impossible.
“Credit is a vital part of our lifestyle and our economy and we need to use it wisely, especially in this tough financial climate,” says Darryl Bowman, director of the credit monitoring service CreditExpert, “It’s important to monitor your borrowing and make sure you’re keeping on top of repayments – and the easy way to do that is to check your credit report regularly.”
Here are some warning signs that will tell you if you are getting dangerously into debt.
You don’t know where the money goes
You should have enough to get by comfortably but somehow you always seem to run short by the end of the month. It’s time to do a budget. Write down everything you spend – every last penny, including cups of tea and bus fares – for a month. Then go through your bills and add in the relevant proportion of essentials such as utilities, TV licence, insurance and car tax. Then see where you can cut back.
You make the minimum payment on your credit card each month
This costs you more money in the long run because you end up paying interest on the interest charged in previous months. If you can’t afford to pay off your balance in full each month, you should pay as much as you can – not just the minimum.
You have been turned down for credit or refused an increase on your borrowing limit
Lenders are never keen to let people who are stretched to the limit borrow even more money. They will have checked your credit report and decided that the risk you may not be able to repay what you owe them is too great. That means it’s time to cut back on spending if possible, repay what you can and investigate moving balances to lower-cost cards or loans.
You take out new borrowings to repay existing debts
You’re deluding yourself if you think this can go on – you’re actually building up more debt over time unless you use a new source of credit at a lower interest rate to repay an old one totally. Act like a lender: take a good look at your credit report so you can see exactly what you do owe, what it’s costing you and whether you can really afford any more. The chances are that this will be a wake-up call – if you wouldn’t lend yourself any more, then nobody else will want to either.
You have emptied your savings to make repayments on debts
While interest rates on savings are so low, it can make sense to use them to repay credit that’s charging a much higher rate – you save money that way. But it’s frightening to have no safety net, so see if you can rebuild a small nest egg in case of emergencies, such as a broken washing machine or a roof that needs mending.
You often post-date cheques
If you don’t have enough money in your bank account to cover your regular outgoings, you need to take action. You shouldn’t have to wait until payday each month to pay for your groceries, rent or mortgage. Look at your budget again and try to identify relatively painless ways to cut back – have friends round to dinner instead of going out, mend your shoes instead of buying new ones, swap DVDs rather than going to the cinema. Small economies can soon add up.
You sometimes skip repayments or make them late
This isn’t a harmless way to get over a temporary shortfall in funds – it will register on your credit report for at least 36 months and could make it difficult for you to borrow when you really need to. If you’re worried that you can’t manage to make a repayment on time and in full, call the lender and explain your circumstances, then offer to pay what you can afford until you have more spare cash.
Your creditors are calling you
If you’re this far behind with your repayments, you need to take drastic action. Talk to your creditors and explain your situation. You may be able to agree a new payment schedule – they would rather you paid back what you owe slowly than have the extra cost and effort of chasing you through the courts. This is the time to get free advice – try Citizens Advice at www. adviceguide.org.uk, National Debt Line at www.nationaldebtline.co.uk or the Consumer Credit Counselling Service at www.cccs.co.uk
You believe you can walk away from your debts
Bankruptcy or an IVA should always be a last resort as they have very serious and long-term consequences. Depending on your circumstances, you could lose your home. You may be discharged from your bankruptcy or pay off an individual voluntary arrangement but the evidence that you let lenders down will remain on your credit report for at least six years, making it hard for you to borrow even when you’re back on your feet. It can also affect your chances of getting some jobs and your ability to rent a new home, as potential employers and landlords can check your credit report if you give permission, so it’s best avoided if at all possible.
You have no idea how much you owe
Sticking your head in the sand won’t make the problem go away. Start by taking a look at your credit report, which lists your credit accounts – such as credit and store cards, loans and mortgages – and your repayment record. It will show how much you owe, to whom and whether you’re falling behind. Lenders check when you apply for credit, to see that you can afford to borrow more, so it’s wise to keep on top of it, as even a small clerical error could affect your ability to borrow.
