There are several types of loans available. To name just a few: unsecured loans, secured loans, car loans and debt consolidation loans.

A loan is a type of credit – and therefore it must be repaid. Repayments are usually made on a monthly basis, and will continue until the loan (plus any interest) has been repaid.

Unfortunately, at a time like now, many people are finding repayments particularly hard to make, whether it’s because they’ve suffered a drop in income or because their essential expenditure has risen.

Help with your payments

However, there is help available. This help could come in the form of budgeting advice – in other words, advice on how to manage your finances more successfully.

Budgeting is all about managing, controlling and understanding your finances. It involves keeping track of your income (the money you receive/earn) and your expenditure (the money you spend).

• Your total income should include everything your household receives/earns: salary, benefits, grants, etc.

• Your total expenditure should include your priority debts and essential costs of living: your mortgage/rent, your utility bills, secured loan payments, etc. It should not, however, include the cost of servicing your non-priority debts (unsecured loans, credit cards, etc.).

By subtracting your total expenditure from your total income, you will be left with your disposable income. This is the money you can use to service your non-priority debts each month and (if you have anything left) to save and spend on non-essential goods and services.

If your disposable income is not enough to cover the cost of servicing your loan/debts, then you should take immediate action. You may wish to start by contacting a professional debt adviser.

Maybe not its total evaporation, but certainly shrinkage with peripheral or weak countries falling off the currency’s map and in all cases, according to the experts, with a heavy price to pay.

Analysts agree that no country would emerge unscathed, at least in the short term. As for the long term? Well, few even dare to imagine the fall-out.

In the view of London-based Capital Economics, even a limited re-drawing of the eurozone’s borders, with the exit of the bailed-out trio of Greece, Ireland and Portugal over the next two years, would trigger a drop in eurozone gross domestic product (GDP) of 1.0 percent in 2012 and 2.5 percent in 2013.

That would equate to the same sort of economic contraction endured between 2008 and 2009 following the financial crisis triggered by the collapse in the US home loan market.

In a recent note to investors, UBS bank calculated that if a “weak” euro country like Greece gave up the currency it would cost every man, woman and child there some 10,000 euros (more than 13,000 dollars) each in the first year, and thousands more over the adjustment period.

Even a “strong” country like Germany would see a loss of between 6,000 and 8,000 euros per head in year one — between one quarter and one fifth of the country’s annual economic output.

According to Jens Nordvig of Japan’s Nomura Securities, Germany’s currency would rise against the dollar, but Greece would lose 60 percent of its money’s value. Italy, Spain or Belgium would lose around a third each.

While scope for exports would improve, debt restructuring on that basis would mean a dramatic rise in borrowing costs for those governments who write off the most.

National banking systems would collapse, experts say, due to a loss of confidence in the value of the currency that replaced the euro.

This isn’t rocket science panicking over hard-earned savings, experience shows citizens pull out what they can and flee while companies would struggle to raise investment capital.

If the economy stopped functioning normally, there would then be the threat of widespread social unrest. Germany, meanwhile, would lose export business due to a rising national currency and also the emergence of new, cheaper European competition.

It would be no different in the event Italy or some other big eurozone economy left.

Jacques Cailloux, a Paris-based economist with the Royal Bank of Scotland, told AFP that were France to exit the eurozone, Germany would suffer because “its banking system would be staring at exposure to French banking debt worth some 200 billion euros”.

US banks would be looking at 10 times that amount, Cailloux added ominously. Looking further down the line, Capital Economics believes prospects for ex-eurozone economies “may be improved by the ability of (these) former member states to set their own policy and allow their currencies to fluctuate.”

Wages would not have to drop under a devaluation, while suddenly a bottle of ouzo would not cost as much for others to import, for example.

“It’s hard to put a price on it, but clearly it would mean a huge cost, if not quite apocalyptic,” Cailloux said of the price for even partial eurozone break-up.

British banks and Asian-based multinational companies are already engaged in prudent contingency planning for the worst-case scenario.

And as Cailloux says, the problem is “everyone is going to have to plan for this eventuality, that’s the issue for 2012″.

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Speaking in New York late on Tuesday, chief executive Vikram Pandit said that the bank has already made $1.4bn in savings this year but needs to respond to slow markets by reducing costs further.

City A.M. understands that the cuts in the Europe, Middle East and Asia (EMEA) region involve six per cent, or 99 staff of its 1,600 capital markets front-office staff being laid off.

That is in addition to cuts in investment banking and mid- or back-office roles, which are said to be in the several hundreds.

Those made redundant will have to clear their desks this week after notices yesterday and today.

They will get at least three months’ pay with potential for more and the possibility of stock options being paid out.

Citi has said the cuts will produce a one-off cost of $400m. They will fall across numerous divisions within capital markets, including equities, fixed income, sales and trading.

Those familiar with the bank said that equities is likely to be hit hardest because it has escaped being cut as much as fixed income so far.

Overall, Citi has about 10,000 staff in London and 267,000 globally, which means the cuts announced on Tuesday amount to two per cent of its headcount, with Europe likely to take larger cuts than others.

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The banking giant faces a total payout of £40million in fines and compensation, following the five-year savings product sales campaign by one of its subsidiaries, NHFA.

The Financial Services Authority said the bank ‘inappropriately’ advised 2,485 customers to invest in ‘unsuitable’ investment bonds between 2005 and 2010.

NHFA sold victims the bonds to fund their care. Typically, these invested in the stock market and required that investors commit their money for a minimum five years.

However, in a number of cases investors had a life-expectancy shorter than the period of the bond. This caused many bondholders to redeem their investments before the bond matured, triggering capital shortfalls and penalty charges.

The victims were elderly, with an average age of 83, and were either about to enter, or already in, long-term care. In many cases these elderly customers were reliant on the investments to pay for their care.

The FSA estimates NHFA customers will be paid a total of £29.5million in compensation.

HSBC has apologised for what happened at NHFA, which closed for new business in July, and reassured affected customers that they would be contacted within weeks.

A review by a third party of a sample of customer files found unsuitable sales had been made to 87 per cent of customers involving these types of investments, with the total amount invested in the period hitting £285million, the FSA said.

The watchdog said NHFA, the leading UK supplier of independent financial advice on long-term care products to help pay for care costs, had not considered the individual needs of its customers and failed to recommend suitable products.

The failings were deemed significant as the customer base was particularly vulnerable and a high number of customers suffered financially, with the average amount invested per customer coming in at £115,000.

Tracey McDermott, acting director of enforcement and financial crime, said NHFA, which had a 60 per cent market share in recent years, was trusted by its vulnerable customers.

She said: ‘HSBC, who owned NHFA, has now recognised the issues and taken steps to do the right thing. They have been given credit for that – but for some customers it will be too late.’

NHFA was acquired by HSBC in July 2005 and, until May 2010, was separately authorised and regulated by the FSA. NHFA sold investment bonds through their families or representatives in the majority of cases.

The products were single-premium life assurance contracts, under which a lump sum was invested for the customer until the bond was either cashed in or until the death of the last life assured.

Brian Robertson, HSBC Bank chief executive, said – ‘I fully accept that NHFA failed to give suitable financial advice to some of their customers. This should not have happened and I am profoundly sorry that it did.

We have high values here at HSBC and this runs contrary to everything that we stand for. That is why when we suspected something was not right at NHFA, we took action. We advised the FSA of our findings and closed NHFA to new business.

We are undertaking a full review of the advice given to impacted customers and I can guarantee that every customer who is found to have not been treated fairly will not be disadvantaged.

At this stage NHFA customers do not need to contact us. We will be contacting them directly during the coming weeks with the aim of putting things right as quickly as possible.

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France is fighting desperately to retain its ‘triple-A’ credit status and has slashed spending and tightened up on tax revenues in an effort to stabilise its strained public finances but the markets are not convinced.

“Last week, the difference in yield between French and German 10-year government bonds breached 200 basis points, a euro-era record amid increased economic and financial market uncertainty in the region,” Moody’s Investors Service said.

“Elevated borrowing costs persisting for an extended period would amplify the fiscal challenges the French government faces amid a deteriorating growth outlook, with negative credit implications,” it said in a website statement.

Even though the spread between German and French borrowing costs has since narrowed slightly, France still pays “nearly twice as much as Germany for long-term funding.

“With the government’s forecast for real (gross domestic product) growth of a mere 1.0 percent in 2012, a higher interest burden will make achieving targeted fiscal deficit reduction more difficult,” it said.

The agency, one of the top three credit-rating groups, said “the domestic and external economic growth outlook presents significant downside risks.

“The French social model cannot be financed if the French economy’s potential is not preserved,” it said, adding that managing the eurozone debt crisis only makes the government’s task harder.

The crisis “will influence the value and credit quality of sovereign assets on French banks’ balance sheets and affect their funding costs and capacity to lend and bolster the economy,” it said.

At the same time, Moody’s said that despite the deterioration in the debt profile and the potential for increased costs, the rating level itself appeared safe for the moment.

The problems facing France were highlighted again on Monday as the financial markets faced fresh turmoil, finding no support in a right-wing government winning power in Spain and fearful that efforts to reach a bipartisan deal to tame the massive US debt were about to fail.

If the Washington talks do fail, as most feel is now likely, then the US debt problems would take centre stage, compounding the eurozone crisis.

Analysts in Paris said Moody’s warning was hardly surprising, highlighting the difficult situation France and the eurozone face as the crisis saps confidence and encourages investors to seek out safety at all costs.

Moody’s statement highlights the fact “that France no longer deserves its triple ‘A’ rating,” said Laurent Geronomi at Swiss Life Gestion.

“The markets are going even further and wonder now when France is going to lose its triple A — before or after the (May 2012 presidential elections,” Geronomi added.

President Nicolas Sarkozy, lagging in the opinion polls, says he will do everything possible to ensure France keeps its top rating.

The stakes could not be higher.

“France is caught up in the contagion spiral,” said Frederik Ducrozet, bond strategist at Credit Agricole.

“The government can announce all the austerity measures it likes but the country is trapped now in a vicious circle,” he said.

Edward Hugh, an independent economist based in Spain’s Catalonia, warned that until Germany, Europe’s paymaster and largest economy, puts up the money to back weaker eurozone states, “this is not going to stop.”

Paris faces a real problem, Hugh said. “The French banking system has 400 billion euros’ exposure to both public sector and private sector debt in Italy … so if anything happens to Italy, France has gone.” – AFP.

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Families are putting aside only about £19 a month in savings after having their budgets squeezed by soaring bills and stagnating wages.

Although typical monthly incomes have risen by £46 since January, energy bills, transport costs and food bills have soared, sending spending on non-essentials plummeting.

About 25 per cent of families are spending nothing on holidays and 52 per cent have no budget for children’s activities. About 30 per cent of families are helping relatives and friends with loans amounting to £442 a year.

‘To make ends meet, we have found that UK families are cutting out luxuries, economising on spending and reducing the amount they save,’ said Aviva spokesman Paul Goodwin.

The study analysed more than 8,000 people and its definition of ‘family’ included couples living together, with no children, and single parents.

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“Credit has been growing at an extraordinary pace, particularly for loans in foreign currency,” the IMF said in a report released today. Such growth may “lead to a worsening of average credit quality” and create “strains on bank funding,” it said.

The U.S. Fed’s pledge to keep borrowing costs at near zero through at least mid-2013 and credit tightening in China have spurred loan demand from Chinese companies in Hong Kong, where a currency peg means the city’s interest rates track those in the U.S.

Chief Executive Donald Tsang warned last week that there’s a 50 percent chance the global economy will shrink next year and Hong Kong may see “a couple of quarters of bad times” as Europe’s debt crisis roiled markets.

While the development of offshore yuan business is “positive” for the city, growing deposits in the Chinese currency may intensify competition for deposits in other currencies that result in higher funding costs, the IMF said.

China needs to raise the convertibility of its capital account to encourage yuan repatriation as the offshore market continues to grow, it said.

Raising Rates

As Hong Kong-dollar loans rose with contracted deposits, the loan-to-deposit ratio in the local currency increased to 87 percent by the end of September from 78 percent a year earlier, Hong Kong Monetary Authority data released on Oct. 31 showed.

There is scope for the city’s banks to further raise interest rates on demand for loans, Norman Chan, head of the HKMA said Nov. 4.

The city’s de facto central bank asked lenders in April to reassess their funding plans amid concerns that “unsustainable” credit growth will curb liquidity and cut loan quality.

The rising liquidity strain may hurt bank asset quality and limit earnings growth, China International Capital Corporation Ltd. said in a report this month.

The IMF expects Hong Kong’s economy will slow to 4 percent in 2012, down from 5.75 percent this year, on weaker export demand.

Should the European crisis worsen and bring a “sudden downside shock” that cuts global growth by 3 percentage points, the city will fall into recession and the city government should prepare to adopt immediate fiscal stimulus such as tax reductions, the fund said.

Cash Handouts

Hong Kong will take “appropriate measures” to stabilize its monetary and banking systems if necessary, HKMA’s Chan said today in a statement in response to the IMF’s report. Financial Secretary John Tsang said the city will act “against any possible adverse events.”

Hong Kong skirted a recession in the third quarter, when the economy expanded 0.1 percent from the previous three months, government data last week showed. Low unemployment and increasing numbers of Chinese tourists boosted consumption even as Europe’s crisis crimped exports.

“Domestic growth is quite strong, the economy appears to be operating above potential,” Nigel Chalk, the IMF’s Washington-based China mission chief, said today via a video teleconference.

“From a macro-economic perspective, you don’t see the need for universal transfers” to households via one-off measures including cash handouts and such temporary policies could be discontinued in the upcoming budget, he said.

Inflation Eases

The city will address the needs of the middle class in the budget in February, Donald Tsang said last month after announcing relief measures for low-income families. The government doled out HK$6,000 ($771) in cash to each permanent resident in a budget U-turn in March this year.

Besides weakness in global trade, Hong Kong is grappling with elevated inflation and the risk of a slumping housing market. Consumer-price growth will ease to a range of 4 percent to 5 percent next year on slowdown in global economy and food price gains imported from China, the IMF said.

Residential property prices slid to the lowest in more than six months last week as the threat of recession continues to dent buyer sentiment, after home prices surged to about 70 percent since the start of 2009 on low mortgage rates and an influx of Chinese buyers.

The financial secretary Tsang said Oct. 27 he sees “downside” risk in the home market on the chance of a global economic slowdown.

Social Burden

There are signs that the city’s property market may cool, while it’s still early to determine if such a slowdown will persist, the IMF said.

The government’s reintroduction of a government-subsidized home plan is appropriate to lessen the social burden on renters and new households that do not yet own a home, according to the report.

Rising property and inflation have led to criticism of the city’s linked exchange rate system, which Hong Kong has maintained since 1983.

Proposals to change the peg are “ill- conceived” as that would sacrifice the city’s monetary and financial stability, the IMF said.

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State-run news agency Xinhua said the country cannot ‘provide a cure for the European malaise’. It came after European officials begged China for bailout funds to help protect large economies such as Italy and Spain from financial ruin.

The decision to ask China for cash was seen as a watershed moment in the shift of economic power from West to East.
Opponents of French President Nicolas Sarkozy said the move was ‘shocking’.

Socialist party leader Martine Aubry said – By turning to the Chinese, the Europeans are showing they are weak. The response should have been European.

In an English-language commentary, Xinhua said China could not stand by while its largest trading partner foundered.
Beijing’s good-will gesture is a good response to those who see China as a threatening rival to Europe, it wrote.
Despite differences in politics, economy and culture, China and the EU are still good friends and partners.

However, amid such an unprecedented crisis in Europe, China can neither take up the role as a saviour to the Europeans, nor provide a “cure” for the European malaise.

Obviously, it is up to the European countries themselves to tackle their financial problems. But China can do within its capacity to help as a friend.’

Such commentaries offer an insight into government thinking, even if they do not reflect official policy. Klaus Regling, the head of the European Financial Stability Facility, was dispatched to China last week after the EU unveiled its plan to rescue Greece, shore up the banking system, and increase the size of the bailout fund.

It was hoped that China may pump around £60billion into the fund, which is expected to be boosted to €1trillion (£877billion). But after a series of meetings, Mr Regling admitted there will be no quick deal with China.

China’s pile of around £2trillion in foreign exchange reserves is the biggest in the world and keeps growing.
Analysts estimate that China holds about a quarter of its foreign exchange in euro assets and there are few other places for it to park investments of such a scale

A prominent member of Mr Sarkozy’s centre-right party, former prime minister Jean-Pierre Raffarin, said that making a stand against China was pointless.

We cannot go it alone. China has taken over the baton and become banker to the world. That’s the new deal of the 21st century, he said.

Mr Sarkozy was also criticised by left-wing political opponents in France who claimed his enthusiasm for a deal with China showed ‘European weakness’.

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The Germans are celebrating the discovery of a £48?billion ‘bonus’ lurking undetected in one of its bailed-out banks.
The money, which would be enough to build nearly 10,000 British primary schools, had been lost in the accounts of FMS Wertmanagement after officials were left so confused by a set of complex financial instruments governing its financial obligations that they overstated the bank’s debts.

News of the windfall came as enthusiasm about the outcome of last week’s European bailout summit was starting to fade, with analysts expressing growing doubt that the measures to write off part of Greece’s debts and bolster the reserves of European banks would provide a long-term solution to the continent-wide financial crisis.

Concerns are increasing about the strength of the Italian economy. On Friday the cost to the country of borrowing on the markets reached its highest level since the euro was created in 1999, rising to 6.06 per cent for a ten-year loan.

An interest rate higher than six per cent is considered a sign that a state is heading for default on its debts.
The scale of the eurozone crisis and the resulting shift in economic power to the Far East was starkly illustrated yesterday when the man sent by Brussels to beg for money from the Chinese admitted that Europe could soon be issuing bonds – contracts to pay out interest on borrowed money – in China’s currency, the yuan.

Klaus Regling, head of the European Financial Stability Facility (EFSF), who has flown to Beijing looking for financial support for the euro rescue plan, said: ‘We have so far only issued euro bonds but we are authorised to use any currency we want if it seems efficient.’

While conceding that it would need approval from the Chinese government and could not be implemented immediately, he added: ‘Over the years it might happen’.

Ruth Lea, economic adviser at City firm Arbuthnot Banking Group, described Mr Regling’s comments as an ‘extraordinary’ admission of a power shift.

She said: ‘Going cap in hand to China like this – what does it tell you about the comparative economic strength of Europe and China? It’s an admission by Europe that they can’t deal with this themselves.’

The £48?billion (€55?billion) discovery in the German vaults is a substantial sum even for such an economic powerhouse, amounting to five per cent of all government spending. It will cut the country’s national debt from 83 per cent of GDP to 81 per cent.

FMS Wertmanagement is often referred to as one of Germany’s ‘bad banks’, housing toxic assets which the government was forced to take on to its books during the banking crisis.

The Brussels summit agreed three-pronged response to the euro crisis: boosting the main bail-out fund, the EFSF, from £220?billion to more than £880?billion – partly by begging money from the Chinese; swelling banks’ capital reserves by £90?billion; and forcing lenders to accept a 50 per cent write-off on Greece.

Plans to reform Italy’s public finances and cut its deficit were also presented to the summit.
Stock markets rose strongly on Thursday in the immediate aftermath of the deal but eased back after analysts picked apart the details of the deal.

The reaction of the markets when they open again tomorrow will be watched closely for further signs of deteriorating confidence.

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Yes, according to payday loan firm Ferratum more and more ‘cash-strapped shopaholics’ are turning to the ‘financial phenomenon’ that is the payday loan to treat themselves to a must-have purchase – must-have being a new dress or the latest smartphone.

Ferratum boasts that with its ‘micro-loan’ service you don’t even have to leave the store to apply for a loan. Customers can just pull out their mobile phone right there and then and get a loan of up to £300 within minutes – so leaving people no time to seriously consider the risks of taking out a ridiculously expensive loan to purchase something they don’t really need.

What Ferratum’s press release today declines to mention is the interest rate – unsurprising really given that according to its website the APR equivalent is 3,113%.

This works out as £33 for every £100 you borrow over 30 days. If you borrow more and take out the loan over a period then the charges increase even further – a loan of £300 over 45 days, for example, will cost you a huge £144 in interest.

I find it quite unbelievable that companies such as Ferratum and Wonga, with its 4,214% APR, are allowed to advertise this type of loan so shamelessly – good old Boris even let Wonga sponsor free tube travel in London on New Year’s Eve!

Payday loans are a prime example of exactly the sort of irresponsible lending that has left our economy on its knees.

But the problem goes much deeper than irresponsible lending.

The fact is many people think that taking out a payday loan to finance whatever fashion or technology trend the celebs happen to flaunt that month is a perfectly acceptable way of managing their money – normal even. It’s not.

We desperately need to break the habit of living way above and beyond our means. It’s one thing to take out a credit card to cover unexpected costs or to space out payments of an expensive purchase like a washing machine.

But when people have spent all their wages and maxed out all their cards, meaning the only option left is a payday loan, and they’re STILL spending on luxuries, it’s fair to say this country has got a serious problem.

Yet, according to companies such as Ferratum, as long as firms are upfront about their charges it’s totally fine to encourage this hugely problematic ‘spend even when you have no money and rack up loads of bad debt’ culture.

Call me old fashioned, but perhaps we need to rein it in and realise that when we can’t afford something, sometimes we just can’t have it.

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