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Debt Free Direct chairman Mike Blackburn, former chief executive of the Halifax, blames the increase in personal insolvencies on the banks.

“We are where we are because of excessive and imprudent lending decisions made by creditors, who end up with debtors strung up with debt they would never be able to deal with,” he said. “Why have the banks been squealing of late over their provisioning? Debtors are having credit thrown at them.”

The total number of personal insolvencies jumped in 2006, at least 45% to 67,584 cases. Debt Free Direct (DFD) estimates that 1m to 2m people are irreversibly over-indebted and will never be able to repay the capital on their loans.

The banks made £37bn in profit in 2006.  The banks have been criticised by several debt management charities for their careless lending.  Banks are deflecting the blame on individual voluntary arrangement (IVA) firms.

The banks claim that debt-management firms are selling unnecessary IVAs to consumers who do not need their services. The number of IVAs taken out last year increased from about 20,000 to 45,000 and their value increased from 15% to 30%.

HSBC raised the issue after its six months bad debt provisions increased in 2006 from £265m to £361m.

Recent reports suggest that banks are acting irresponsibly by releasing figures which states that teens are in serious debt because credit card companies have been lending unsecured loans to high school students.

Other reports have brought to light the fact that banks are issuing loans without asking clients for proof of income or referencing their consumer credit information.

A secured loan a loan in which the lender requires the borrower to provide some form of security, such as the borrower’s property.  Secured home-owner loans are available in different amounts and can be borrowed for different purposes.  The amount that you can borrow ranges from £3,000 to £50,000.  There are some lenders who will consider lending up to £100,000; it all depends on the lender and how much security the borrower has to offer.  The amount that is borrowed can be repaid monthly over an agreed term, anywhere from three years to twenty five years.  Often, if you repay the loan earlier than agreed you can be charges a penalty.

The interest that the lender charges depends on the equity that you have in your property and the lender’s view of your ability to repay the loan.  The APR that is quoted by the lender is usually the typical rates and act, as a guide for what rate should be offered on an individual basis.  When you are looking for a secured loan you should compare the APR on the loans that are offered.

Typically secured loans are easier to obtain than unsecured loans because then the lender has security on the money that is being borrowed.  A secured loan is useful for larger amount where the applicant requires a longer repayment period.  This type of loan is ideal for those who are self-employed, have recently changed jobs, or have adverse credit.  If you find yourself in one of these positions, then you should consider a secured loan.

A study by SAGA and Principal International shows that half of their survey group,  aged over 50 will consider buying abroad with Spain as the favourite location.

Spain’s proximity to the UK, its climate and its slow pace of life are the determining factors.

However, realtors do warn consumers to avoid combining a holiday with property shopping.  George and Eleanor Whillock  set up Keyhole Property Search in Mallorca.

Whillock said: “You have an absolutely beautiful island with a vibrant property scene, but it is very competitive. It’s easy to get it wrong. People make the mistake of combining a holiday with buying a house. The combination of sun and wine can lead to the wrong decision, [especially] with some agents who can be a bit pushy. That was our experience when we were buying, so we got involved in helping people into the marketplace.”

However, moving to Spain is not cheap.  Apartments cost up to £1m and villas can cost as much as £13.4m in Mallorca.

But, Spain does have investment potential. “People are looking at high inflation on property prices,” Whillock explains. “As an average across the island in 2005, prices rose by about 15 per cent. We bought our apartment in June 2005 and paid €430,000 [£288,000] for it. Today it’s worth €650,000 [£435,000].”

Recent reports reveal that many UK consumers are purchasing homes around the world for their retirement partially for the investment, and partially to provide a variety of options.

The number one draw for the content is the lower interest rates.  Homeowner loans are cheaper in Spain, but like all things, consumers are warned to get a reputable agent and do not rush into anything.

There are many benefits of a credit card if it is used wisely, and you are able to keep up with the monthly payments.  If you are considering applying for a credit card, you should shop around and research all the benefits that each card offers to see what would best suit you and your needs or lifestyle.

There are card issuers who offer rewards to their customers with a range of useful benefits.  Some benefits include domestic warranty cover that will protect your electrical purchases a year after the manufacturer’s warranty expires, or free purchase protection insurance that will cover your purchases against loss, theft or accidental damage.  Some companies also offer a price promise cover, which is a promise from the company to ensure that you will be refunded the difference of a product should you find it cheaper elsewhere.  It is worth looking for cards that offer these benefits, as they will be a great asset for your household.

Some card issuers offer charity cards, which cover a range of good causes and are issued in partnership with the charity that you choose.  The way charity credit cards work is when you open your account you make a one-off donation when you use your card, and an ongoing donation is made by your card issuer.  Typically the card issuer will donate a percentage of the amount that you spend, with no extra cost for you.

There are many useful and beneficial credit cards available, however when you do sign up for a card you need to be aware of the interest rate, the APR, and any other hidden charges.  If you can, avoid withdrawing cash on your credit cards, as you will find added fees and high interest charges on your account.  Typically with cash withdrawals, there is no interest-free period, meaning you will be charged interest from the day of the withdrawal.  Also, if you plan on using your card abroad you will want to look at the benefits that it will have.  Often it can be more expensive to use your card overseas than it would be for you to exchange cash.  So before going abroad, you should assess just how much it will cost you when using it overseas.

The high levels of bad debt may be forcing credit card companies and banks to reconsider what they offer consumers.  Debt reached its highest level in 2006, with more than 100,000 consumers petitioning for insolvency.  This resulted in high losses for credit card companies and banks.

IVA companies have gouged into the profits of unsecured loan lenders, resulting in more losses.

Combine these with the Office of Fair Trading’s move to limit bank charges and fees on overdrafts, and the banks are reeling under the burden.

Early in 2007, credit card companies and banks were scrutinised and rebuked for not following regulations and making sure that consumers could afford to repay their unsecured loans.

This came following reports from consumer groups which stated that many borrowers were not checked for proof of income, or even had their consumer credit information report checked, before they were given unsecured loans.

Banks are not only buckling under the pressure and asking for proof of income, and running credit checks, but they are coming down harder on borrowers who have bad debts.

The move is causing mixed emotions among consumers. However, only time will tell if consumers will find other ways of borrowing personal loans.  While the move by banks and credit card companies is motivated by their determination to slow their losses, it may have a positive effect on the population.

There has already been an increase in secured loans, partly because unsecured lenders can now force the sale of a home to repay a loan, and partly because of the lower interest rates.

There are many mortgages that are available, and that you may qualify for, and be interested in.  Today many lenders are pushing borrowers towards interest-only mortgages.  However, you must be aware that interest only mortgage is not for everyone.

An interest only mortgage is a loan where you will only pay the interest on the mortgage monthly for a fixed term, once the term has ended, you have to option to remortgage, pay the balance in a lump sum, or you start paying off the principal.  The typical term of an interest only mortgage is usually five to seven years.  Most people will end up remortgaging their loan if they are unable to come up with the balance of the mortgage by the end of the term.  If you choose to pay off the principal at the end of the term it may prove to be very costly.

You should only consider taking out an interest only mortgage if your income is mostly in the form of infrequent commissions or bonuses, or if you expect to earn a lot more within a few years.  You should really only consider an interest only mortgage if you know you will invest the savings that you are making by paying just the interest on the loan.  If you are a regular wage earner, financial advisors do not recommend getting an interest only mortgage, especially if they have no strategy for investing the savings.

It is worth discussing your options with your lender or broker to see what type of mortgage is best for you, and if an interest only mortgage is suitable for you and your needs.  By browsing and searching for the best offers, you will benefit greatly from the time and dedication that you committed to your search.

One topic that has taken the forefront of all financial discussions are the interest rates and whether an impending housing market crash is in the immediate future.

The predictions vary depending on whether you ask an IVA firm, a realtor, an economist, or an opinionated writer.  One of the fundamental truths about the financial market is that many factors are influenced by the population’s opinions.

A healthy economy can stall if consumers loose confidence in their economy and stop spending.  This creates a ripple effect that touches every sector of the economy from lenders offering first-time homeowners a homeowner loan, to corporation takeovers.

“Affordability” is the key measure of the sustainability in any market.  This truth is being broadcast as fact over the internet, causing many homeowners to back off on their plans to borrow a loan or improve their home.

The measure of affordability has been the ratio of house prices to average income. This ratio has ruled in the UK economy for decades. However, not the UK is following trends in other countries where people have learned to accept the fact that they will never own their home.

The house price analysis website houseprice.crash.com shows a time series analysis of this ratio. This report states that the correction in the housing market usually levels out about four times the homeowner’s income.

This may point to a problem in the market, when looking at the UK market, but the figures are less disturbing when taking a global look at the housing market.  There was a similar panic when the ration breached five times in 2002.  This did not cause a housing price crash.

There are many types of mortgages that are available on the market.  Some mortgages are risky, while others offer a bit more security.  A variable rate mortgage can be a risky form of a loan, however if you want to take advantage of the current low interest rates, these types of loans may be the best option especially if you think that the rate will not rise over the years.  One such variable rate mortgage that may prove to be less risky is a capped rate mortgage.

A capped rate mortgage is a variable rate mortgage that has a fixed upper rate limit, or cap.  When you have a capped rate mortgage you know in advance just what the highest monthly payment you may have to make.  For example, if the cap rate on your loan is 7%, the loan will be charged at the current variable rate as long as it is no more than the capped rate of 7%.  A capped rate mortgage is generally a comprise between a fixed rate mortgage and a variable rate mortgage.

There are advantages that a capped rate mortgage offers, such as a peach of mind.  If there is a sudden inflation, and the interest rates rise, a capped mortgage offers protection, ensuring your repayments don’t go over a certain level.  It will also assist you with your budgeting, as you will know what the highest amount your mortgage repayments can be.  You will also be able to benefit from low interest rates without much risk.  However, capped rate mortgages are generally more expensive than fixed mortgages or discounted rate products.  As with any mortgage, it is worth shopping around and comparing price quotes and interest rates.

Whilst debt can help consumers start their lives quicker, often helping people reach a comfortable lifestyle a decade earlier than normal, it is also a form of slavery where the consumer is forced to make banks and financial companies rich in exchange for that decade.

Many consumers who borrow a homeowner loan this year will find themselves indebted for 40 years, or more, for the privilege of owning a home, despite the fact that the banks are raking in billions in profits each year.

Britain’s personal debt increases by £1 million every 3.85 minutes.  This increase is reflected in the number of consumers seeking debt management assistance.

Consumer Credit Counselling Service (CCCS) said that the average debt of consumers who contact them rose to £31,000 in the third quarter of 2006.  This is an increase of £2,283 over the last quarter in 2005.

A Bank of England survey estimates that 6 million UK consumers are struggling with their financial burdens. A poll conducted by the Conservative “state of the nation report” suggests that the number of adults who struggle under serious debt problem is now as much as 9 million.

This is a 7.7 per cent increase in the number of households struggling to repay their mortgage, according to the Bank of England.  However, the Bank of England does continue to explain that this represents a very thin sliver of the UK economy.  The BoE believes that the average consumer is still financially healthy, building wealth, instead of struggling to keep out of insolvency.

One of the most important steps in successful money management is saving money.  However, this is a hard step to master.  Many people quickly become discouraged when they attempt to save money, even when it is a small amount that they have to save.  Saving is a habit that you must form, and by making goals and sticking to it you can watch as your money accumulates and builds interest, encouraging you to save more and in time you will find saving money is easy.

When you first decide your reasons behind savings, whether it is for a down payment on a car, or a house, maybe a vacation or retirement.  Whatever your goal is, you have to make a set amount that you wish to save and what you are saving for.  This way you can always have this goal in mind whenever you find yourself spending money.

Once you know what you are saving for, you then need to sort out your bills.  You need to figure out how many expenses you pay out every month, along with how much income you receive.  This way you are able to sort through your bills and see just want is necessary and what isn’t.  Maybe paying for a cheaper package can reduce your cable bill, or you can do things within your home to help reduce your utility bills.  However, the biggest downfall may be your miscellaneous spending habits.  These are the hardest to overcome.  Buying a cup of coffee on the way to work, snacks as well as lunch while at work, and then other expenses such as clothes and jewellery.  These can add up over time and by writing down all your small expenses you will then realise just how much you are wasting, and how much you can save by changing some of these habits.

Once you realise what expenses you can save on, then you can write up a budget that you know will suit you and your lifestyle, and also help you to save money.  By setting aside a small amount every month, and sticking to your budget, you will quickly save up the money you need to obtain your goal.