Best Loans News

As we approach Christmas, the majority of us can hopefully start to relax a little, in the knowledge that all their Christmas shopping and preparations have now been completed. The more organised individuals will have started saving throughout the year to cover the cost of the festive season, but many more will have entered December wondering how they were going to pay for Christmas this year.

Not surprisingly, a large number of individuals have turned to credit to cover the cost of their Christmas shopping, using overdrafts, credit cards and unsecured loans to get them out of trouble, although many of these people will only be digging themselves deeper into bad loan debt.

The latest figures from the Finance and Leasing Association (FLA) have shown  that the amount of credit on personal loans, credit and store cards had increased by 5 per cent to the end of October this year, above the same period twelve months ago.

The FLA figures show that there was a general increase in the use of unsecured loans, credit cards and store cards, with many individuals dramatically increasing their overall level of unsecured loan debts. These figures are also likely to get higher as we get nearer to Christmas.

The number of car loans has also seen a dramatic increase, with the amount of lending increasing by 11 per cent over the previous twelve months.

A growing number of borrowers are now in the position whereby they are only paying off interest on their loans and credit card debts and can not actually afford to make additional repayments which will clear the capital amount of the loan or card balance.

Fiona Hoyle of the FLA said “Before using credit, think how you’re going to pay it back and what is the best product for you. If you are in financial difficulty, seek help. Speak to a debt adviser or your lender as soon as possible to discuss a sensible repayment plan.”

The equity release loan market, or lifetime mortgages, has grown significantly over the course of the past few years, ass many people now see this as a realistic part of their retirement planning, whether it is to provide cash funds for additional income, or to repay any outstanding  loans and other debts on retirement.

The equity release loan market used to have a bad reputation as a serious financial product and many individuals were scared away from taking such a loan after hearing some of the horror stories form previous borrowers.

But this reputation has been turned around by the introduction of the equity release loan trade body SHIP (Safe Home Income Plans), who introduced a code of conduct and rules for those lenders, intermediaries and loan brokers involved in the equity release loan market.

SHIP has just celebrated its 20th anniversary and has produced figures which show that over this period, there have been 270,000 equity release loans taken out with the help of advice from SHIP members and loan providers, with a total value of around £12.1 billion.

SHIP has not only managed to turn around the attitude towards equity release loans, but also to raise awareness of the various loan products which fall under this banner, as well as giving potential borrowers confidence and peace of mind that their loan and their home is protected by things like the no negative equity guarantee, offered by SHIP members on their loans.

Andrea Rozario of SHIP said “Over the last 20 year SHIP has achieved a tremendous feat in terms of engaging with stakeholders, such as politicians, civil servants, and the third sector and increasing awareness of equity release products.”

“At the same time, a once maligned industry now receives fair and balanced recognition from the media, many of whom now see it as a part of the retirement debate.”

With Christmas just around the corner, many people will now be fully organised, with all their shopping complete and plans for the big day in place, whilst others will still be running around at the last minute trying to find those last few presents.

One additional problem for many individuals this year particularly, is that of being able to pay for all their Christmas shopping and it is at times like this, when people take out loans and borrow money on credit cards, often without considering the consequences in the New Year.

It has been estimated that somewhere in the region of 3.5 million people will take out a pay day loan in order to help cover the cost of Christmas, despite the fact that around 60 per cent of these will regret their decision within a few months of taking out the loan.

Credit cards and overdraft facilities are also often seen as a quick alternative to having money, or taking a loan out, but once again, large debts can soon mount up on a credit card if someone is not paying attention to how much they are spending.

It is important for people to avoid these methods of borrowing money wherever possible and individuals should not get carried away with their Christmas shopping by ignoring their budget and overspending on expensive loans and cards.

Many people are still likely to wake up with a financial shock in the New Year, once their credit card bills land on the doormat and their pay day loan repayments begin. For those who still have a good credit rating, a debt consolidation loan could be the answer as a cheap loan alternative to pay day loans and credit cards.

However, a large number of borrowers will not be accepted for a debt consolidation loan, due to their credit rating and many of these individuals could face financial misery for some time to come, just for the sake of this year’s Christmas shopping.

With interest rates on new home owner loan products being historically low at the moment, coupled with relatively low property prices, many people now believe is the best time to get themselves onto the housing and home owner loan market, or move up the housing ladder.

The latest figures from the Financial Services Authority (FSA) have shown that the total amount of gross lending on new home owner loans, both to movers and first time buyers, have now returned to the same levels as they were back in the third quarter of 2008.

The third quarter of this year saw a total of £43.6 billion worth of new home owner loans and mortgages being offered to borrowers, a 19 per cent increase on the previous three month period and 7 per cent up on the loan figures for the same period over the previous two years.

However the figures for net overall lending in the home owner loan market showed a decrease of around 12 per cent, as many existing borrowers take advantage of their currently cheap loan rates to repay their loan early, or at least reduce the balance significantly for when interest rates increase again.

 Of all the new home owner loans being taken out, 52 per cent have been taken on a fixed rate loan basis, as borrowers choose to lock into a low loan rate. However, in the overall home owner loan market only around 29 per cent of loans are on a fixed rate basis.

Within the number of new loans for house purchase, the value of first time buyer loans increased by around 15 per cent over the course of the third quarter of the year, to make up a total of 6.9 per cent of the value of all new loans.

The available choices for someone looking for a new home owner loan or mortgage has been particularly limited in recent years, as banks and building societies have been restricting their lending, whilst they  restore their own balance sheets, following the effects of the credit crunch.

However, the number of new home owner loan and mortgage products has increased by around 87 per cent over the course of this year, according to new data from Mortgage Brain, the loan sourcing system for financial advisers and loan brokers.

The figures from the home owner loan sourcing system show that the number of different home owner loan products has grown to a current figure of 14,052, up from just 7,519 at the same time twelve months ago.

This has been the best year on year increase in loan product numbers over the past three years according to Mortgage Brain, with variable rate loan deals showing the greatest increase in numbers, with a net increase of 120 per cent over the last twelve months.

Tracker rate loans and fixed rate loans also saw a significant increase, but at slightly lower levels. Although fixed rate loan deals still appear to be the most popular option with borrowers, these saw the lowest increase in numbers, with a net increase of just 72 per cent over the year.

Despite these increases in product numbers, loan providers are still extremely cautious about who they are prepared to offer loans to, particularly when it comes to high loan to value products and meeting the underwriting criteria and loan affordability requirements still remains a challenge for many potential borrowers.

Mark Lofthouse of Mortgage Brain said “There are now over 6,500 new loan products available and with strong rises being seen across all of the main product types, intermediaries now have more opportunities to source and advise on a greater variety of products.”

There has been a huge growth in the number of companies offering pay day loans in the UK, as more people are being rejected for a more traditional loan by banks and building societies. But as the number of pay day loans being taken out increases, so do the number of customer complaints about their loan.

The Office of Fair Trading (OFT), has now said that it will carry out an investigation into the practises of some pay day loan companies after the number of complaints about these expensive loans has soared.

The OFT has reported to the government that the number of complaints made via the Consumer Direct helpline about pay day loans has more than doubled over the course of the past twelve months, with a total of 1,535 separate complaints in the first eleven months of this year, compared with just 700 loan complaints for the whole of 2010.

As a result of this, the OFT is conducting investigations into several pay day loan companies and taking action against those who have failed to comply with advertising standards and rules on their websites, regarding the terms and conditions of pay day loans.

The OFT have also found that a number of firms do not carry out adequate affordability checks on pay day loan customers, or advise loan customers on the charges associated with their loan if they fall into arrears.

Joanne Elson of the Money Advice Trust said “Many families are feeling the strain caused by low wage growth, rising unemployment and increasing prices. This is a situation ripe for pay day loan companies to exploit and so it is vital that struggling households are protected from the poor practices of these companies that will only land them further in debt.”

“Pay day loans have a habit of making a bad situation worse. They are often sold inappropriately, to people who should clearly not be taking on the burden of more credit and who are unlikely to be able to meet the terms of the agreement without incurring extra fees and charges.”

I know this may seem like not a particularly cheery subject at this time of year, but it could be relevant as more and more individuals approach Christmas with a huge burden of personal loan and credit card debt hanging round their necks, increasing their debt stress levels to breaking point.

So…do you know the answer? A new survey conducted by Gocompre.com has found that a large percentage of the UK population believe that their personal loan and credit card debts will die with them if anything should happen to them.

The survey found that 18 per cent of the population believe that their unsecured loan and credit card debts will die with them and a further 16 per cent believe that any value of the estate will pass to the family, who can then choose which loan debts are paid off first.

Of course, this is a complete myth. A person’s loan and credit card debts will still be owed even after they have died and these loan debts are paid off by the person’s estate before any money is passed on to the beneficiaries of the estate.

If a person should die without leaving enough money to repay their personal loans and credit card debts, these debts will then pass on to their next of kin, who will become responsible for repaying any outstanding loan debts.

It is therefore vitally important to take out some form of life insurance to cover the outstanding value of any loans and other debts which a person may have, if they do not want to burden their loved ones with debt if they die.

Jeremy Cryer of Gocompare.com said “No one likes to think about what will happen when they die, particularly if it’s before reaching a ripe old age, but you owe it to those you’d leave behind to ensure they aren’t left in a financial mess when they are trying to pick up the pieces after your death.”