With a massive £1.3 trillion of personal debt in the UK, obtaining credit and staying financially afloat are daily dilemmas for the British consumer. Many major banks, including Lloyds TSB, have recently declared an increase in the number of customers experiencing repayment difficulties, with the need for better financial advice and support has never been more important.
Shadow Chancellor Oliver Letwin said that the current levels of personal debt comprise a “time bomb” that poses a threat to as many as 15 million households.
To help consumers make informed decisions when taking out personal finance products such as credit cards, loans and insurance, a new breed of financial comparison websites has emerged. Since 1997, consumer websites like Moneynet (http://www.moneynet.co.uk/ ), Moneyfacts (www.moneyfacts.co.uk/), and Moneyextra (www.moneyextra.com/) have provided invaluable information to help choose the best financial products. However, what happens when things go wrong and payments cannot be met? The unfortunate borrower gets branded with a bad credit rating and any further loan applications may be turned down, or lenders may charge higher rates of interest if there is a higher risk in the default of a loan. To someone already in financial difficulties, increased rates will of course make a bad situation worse.
Each lender weighs the information contained in a person’s credit file differently. However universal contributing factors include:
The best way of reducing the risk of being classed as a bad debtor, is to improve your credit score and to ensure that a good record does not go wrong.For people who have been refused credit, or offered loans at atypically expensive rates, here are a few basics on how can you keep your credit file in good shape:
Source: credit reference agency MyCallcredit (http://www.mycallcredit.com)
However, should the worst happen it is always best to immediately seek qualified help from the free debt counselling services available including:
Mortgage sales hit problems
The housing market has been buoyant over the past few years, but mortgage providers and first-time buyers are both now facing a tough time. Following announcements from the Bank of England that there has been an overall decline in the total number of UK home-buyers, and a declaration from the Financial Ombudsman Service (FOS) that the number of disputes concerning mis-sold mortgage endowments has now hit record levels, it seems that mortgage lenders are facing a bleak time. Add to this the results of a new survey, by the Edinburgh Solicitors Property Centre, which shows potential first-time buyers fear that they may never get onto the property market, and you start to see a worrying picture of the housing market emerge.
Alliance turning towards the financial dark side
Following in the footsteps of many of its high street competitors, Alliance and Leicester has announced that it will no longer accept new customers onto its Online Saver and Direct ISA accounts. The interest rate for the Online Savers account is also being cut from 5.35% to a straight 5%.
UK debt becoming a cause for concern
The UK attitude toward debt has received a major shift over the past few years. Where once the UK was seen as a nation that held up thrift as being virtue and considered debt a vice, it has now changed to owing £1.3 trillion on mortgages, credit cards and other loans.The main cause of this growth in debt is the British obsession with house ownership, making up 80% of the borrowing. Figures for the number of repossession orders granted in the first three months of 2005 have reached nearly 26,000, which is the highest figure since 1995.
