The current statistics released from Wilkins Kennedy reveal that 44 per cent of all bankrupts are women. This is up from 32 per cent in 2000. Kevin Stevens, insolvency partner at Wilkins Kennedy, said that this development shows no signs of being a passing trend “or abating”.
Credit card use is sighted as the main problem. Many women who are petitioning for bankruptcy are young single women who have acquired dozens of credit cards. Financial trends have perpetuated the problem. Women’s financial independence is outgrowing the rate at which their salary rates are growing creating a financial void.
Changing credit card providers is not a solution. Women are taking a short sighted look at their financial debt. They change credit card providers to take advantage of the promotions and short-term 0 per cent interest rates. While this seems a sensible and even logical step, it only works if the move is balanced with a plan to reduce the debt. The reality of this situation will become apparent if the Bank of England continues their plan to increase their interest rate to 4.75 per cent.
Two main factors attribute to the current problem. The first is the credit card’s push to put cards in the hands of younger women. It is relatively easy for a college student to acquire a credit card. This adds an additional burden of debt onto the student’s educational loans. The second problem is the reduced stigma of bankruptcy. As the fear of insolvency abates, so does people’s desire to control their debt.
These two factors have created a generation of young women who are spending faster than their salary increases, creating a debt vacuum that will follow them for the next decade
There are many strategies for consumers who are unable to meet their financial burden each month. The Holiday Plan offers a few months relief. It is difficult to secure a Holiday Plan, and few financial institutions offer it. The first thing a consumer should do when they find themselves unable to meet their debt is to contact a debt consolidation service. The best plan of action is to ask a professional for advice.
However, most consumer’s first plan of action is to attempt to solve their own debt problems. This approach can involve obtaining a secured loan, or re-mortgaging their home to pay of the several current debts. The result of tackling a debt problem personally can be devastating. Current statistics suggest that 66% of all consumers in the UK are insolvent.
The pressure of making ends meet while both the interest rate and inflation is outstripping the dollar value is a challenge most consumers are not trained to handle. A professional financial planner may help a consumer remove debt by strengthening their financial portfolio.
Secured loans offer flexibility allowing consumers the option of acquiring the exact amount needed to improve their financial outlook.
The flexible repayment terms separate a secured loan from other forms of debt consolidation. The lower risk of secured loans gives the consumer an opportunity to institute a solid financial plan to eliminate their current debt and prevent a future financial crisis.
Balancing debt consolidation and leveraging your investments offers long-term benefits that outweigh the benefits offered by other financial strategies
APACS, the UK payments association, has released a report that shows that the number of cash machines in the UK has more than doubled in the past six years, from 27,379 in 1999 to 58,286 in 2005. Brits made 2.7 billion cash machine transactions in 2005. This is equivalent to more than 42 per person and is more than any other country in the EU. The UK has 58,000 cash machines and there were eight withdrawals each second in 2005. Most transactions (97 per cent) took place at free to use cash machines.
APACS spokesperson Sandra Quinn comments: ‘we get an exceptional level of service in the UK. Not only do we expect cash for free from our own bank’s cash machines - which isn’t always the case elsewhere in the world - but we get to use their competitors’ machines for free as well.’
She added: ‘Over the next decade we’ll be continuing to use cards more and cash less, especially for lower-value purchases. However, there’s still absolutely no sign of us becoming a ‘cashless society’ and whilst this is the case the future of the cash machine remains rosy.’
First time buyers are now borrowing 3.24 times average salaries, say the Council of Mortgage Lenders (CML). The CML’s figures also revealed that mortgage interest payments as a percentage of income were up for the fourth consecutive month to 16.8 per cent.
Higher pricing on fixed rate loans has led to a fall in take-up. These loans accounted for 65 per cent of mortgage loans, down from 68 per cent the previous month. In contrast, tracker mortgages gained in popularity. They rose by 15 per cent and accounted for 23 per cent of all new loans.
CML’s director-general, Michael Coogan, commented: First-time buyers are continuing to find ways of getting a toehold on the property ladder, showing just how popular home-ownership is to many young people. But higher income multiples, coupled with higher interest payments as a proportion of income, suggests that they are continuing to stretch themselves to do so.’
He urged first time buyers to make sure their debts were manageable, especially with a further interest rate rise on the cards.
An Equity Release releases capital tied up in a home without applying for a traditional mortgage. Depending on the homeowner’s age and the value of the property in question, the bank will offer a secured loan. This loan is not replayed until after the homeowner’s death, or if they move into long-term care. Most consumers do not realize what happens next. The home is sold and the loan repaid. Any balance, minus broker and lending institution fees is repaid to the estate.
Many homeowners fail to see the down side of an equity release mortgage. They believe the mortgage is interest free. They borrow half the value of the home for twenty years and expect to leave their children the other half. This rarely happens.
The resale value of the home is often far less than it was at the time of the mortgage. The interest rate may also vary. A younger person may garner a lower interest, but when compounded over a longer period then incur more debt than anticipated.
Equity Release schemes have many drawbacks. They do allow the homeowner to remain in their home as long as possible. They do let the homeowner use the equity in their home to enjoy life in the later years. The main disadvantages are their inflexibility and more expensive than other methods of borrowing money.
Never consider an Equity Release scheme without fully understanding the repayment consequences. Who is responsible for repayment if the homeowner goes into long-term care when the housing market is low, or when other factors make the value of the house less than the mortgage repayment? A more important concern should be whether the repayment is on-demand, or if the children will have to secure a mortgage on their home to cover any shortfall in the house sale.
Steve Smith director of Interfinancial Limited says “It is probably advisable to get everybody in the family involved in making the decision, and als to seek the advice of a solicitor before signing anything.”
The cost of supporting a football team could be enough to pay off a mortgage, reveals Virgin Money. Virgin Money’s research reveals that hardcore fans will spend more than £100,000 over a lifetime. This includes some £20,000 on season tickets, £11,600 on tickets for cup matches and away games and £40,000 on travel. They will also need to shell out for programmes and food and drink.
The overall bill for each season is a whopping £1,875. Those who follow their teams from the comfort of home have a seasonal bill of just £273 and a lifetime bill of £14,716.
Malcolm Clarke, chair of the Football Supporters’ Federation, said: ‘This research backs up what we’ve been saying for ages. Fans are being priced out of the game.’ He added: ‘We need a new deal for the match-going supporter’.
Virgin Money has launched a Football Fans’ Price Index to keep track of the price of matchday essentials. The index will be updated every three months. Spokesman Scott Mowbray said: ‘The prospect of forking out as much as £100,000 just to follow your team is particularly daunting for young people who are desperate to find the money but may be struggling with debts.’
Churchouse Financial Planning has launched two online advice services for consumers who wish to manage their money on the internet, reports IFAonline. Advicemadesimple.com and pensionsmadesimple.com will offer financial planning support without the necessity of a face to face meeting.
Consumers who use the service can complete online factfind forms and then receive a financial planning report, after paying a fee of £699. If they follow the plan, then additional fees are due. The fees are less for pensionsmadesimple.com, which is a reduced service.
The firm feels that the service allows people to get more involved in their own financial planning. Consumers are also free to go to other advisers once they have received the report. The firm intends to make the financial planning reports available online in the next stage of development.
The mortgage is the most common type of secured loan. Secured loans traditionally provide longer terms at lower interest rates. This makes it difficult for most consumers to make a wise choice. A longer-term secured loan at a lower interest rate may incur more interest than a short-term loan at a higher interest rate. It is advisable to seek professional help when looking for a secured loan.
Bad credit secured loans offer capital to borrowers but rarely offer the benefit of low interest rates. Their short term benefits may be offset by a long term financial burden.
The financial burden and long-term responsibility of a secured loan is the main reason why many consumers shop around. Their desire to find the best interest rate an a manageable payment schedule can damage their credit rating. This is compounded when the credit searches span several months. Lenders become concerned that the consumer is desperate, or there are undisclosed facts that prevent them from obtaining a loan.
Few lenders will offer a quote without an application. One way for a consumer to protect their credit rating is to ask that the lender do a “quotation search.” There is no reason why they should refuse. A quotation search offers the same information, without leaving a ‘footprint’ on the credit report.
Mortgage companies are familiar with quotation searches. Many loan companies are not. This can make it difficult. Most consumers are unaware that Experian offers an education service complete with email updates of changes to a consumer’s credit report. This invaluable tool allows consumers to approach lenders with basic information and understanding of the credit process.
“When shopping around for a secured loan it is more sensible to go through a specialist broker who will search the market for you, and leave a smaller footprint on your credit file” says Steve Smith director of Interfinancial, “by trying all the lenders in turn to find the best rate an applicant can harm their credit rating so much they may not be able to secure a loan.”
Halifax has urged students to think carefully when choosing a bank account. Although many bank accounts offer free gifts as opening incentives, this might be a false economy for students. According to Halifax, students pay for these ‘free gifts’ with reduced interest-free overdraft limits. There is a gap of up to £1,750 between the interest free overdraft limits offered by banks offering free gifts and those that don’t.
Halifax says that many students may choose to make up the deficit by using a credit card. They would then end up paying a higher interest rate of around 15 per cent. Peter Jackson, managing director of HBOS Banking and Savings, comments: ‘The best advice is always to avoid getting in debt in the first place but for most students that’s just not possible. So the next best advice is to borrow money as cheaply as possible and that’s why it’s important not to be taken in by the lure of free gifts and to concentrate instead on the interest free overdraft limits which are on offer.’
Coventry Building Society has relaunched its MOREgage portfolio with a range of three and five year mortgage deals. MOREgage is aimed at the first time buyer market. It combines a mortgage of up to 95 per cent with a loan of up to 30 per cent of the property value. The loan is for a maximum amount of £25,000 and is at the same interest rate as the mortgage. Borrowers can therefore borrow 125 per cent of the property price and cover some of the associated costs of home ownership.
Interest rates for the three year fixed deals range from 6.09 per cent to 6.19 per cent, while rates for the five year fixed deals range from 5.89 per cent to 5.99 per cent. The MOREgage product includes free valuations and an arrangement fee of £699.
Louise Cuming, head of mortgages at Moneysupermarket.com has welcomed the new deals, but warns: ‘Getting a 125 per cent mortgage comes with health warnings. those with a 125 per cent mortgage are more at risk if house prices fall because they will be in negative equity immediately. Not only this, but buyers might find it harder to remortgage to a lower LTV (i.e. 97 per cent or 95 per cent) unless the value of their house price rises substantially or they gain access to significant funds.’