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Banks have increased their onslaught of credit card customers to offset losses due to increases in bad debts and the cap on overdraft fees.

“The tactics used include the magically appearing annual membership fees, charges for pseudo-cash products such as credit-card cheques, and hidden catches in balance-transfer deals.

The banks have been playing a sleight-of-hand game with their consumers for years. Now it has stepped up to levels that catch most consumers off-balance. In fact, many consumers build up hundreds of pounds of ‘hidden’ charges before they catch onto the bank’s ploy.

One of the biggest tricks is the five pound scheme. The credit card has no minimum balance each month.  Instead of a minimum monthly repayment the customer pays the monthly interest, plus premiums for payment protection insurance, plus fees, plus £5. However, this means that the average person never actually repays any of the capital from one year to the next.

Another scheme pays of the least expensive debt first.  The more expensive debts accrue more interest for longer periods – and of course, the interest is often calculated on the full total of the purchase until paid in full.  This means that all the small purchases are repaid quickly, leaving the large payments languishing on the card for months, or years.

Credit card, and most unsecured loan debts, have higher interest rates than personal loans.  Some unsecured loan debts are currently as high as 25%, and expected to increase at least one more time this year.

Consolidating bills is not an easy task, especially if you have a lot of debt.  The more debt you have the harder you may find it to obtain a debt consolidation loan at a low interest rate.  If you are not careful when selecting a consolidation loan, you could end up deeper in debt.

As you are searching for a consolidation loan, you must make it your goal to search for a loan that will lower your overall costs.  To accomplish that, you will want to find the lowest interest rate possible and have a plan to pay off your debt in three to five years.

Using credit cards to consolidate your debt is one type of loan that you can use if you do not have a large amount of debt.  Consolidating your debt on a credit card will require you to find a card with enough credit limits to cover the entire amount of the debt.  If you take out a personal loan for less than £2,000 you may find that the interest rate will be higher than if you take out a larger amount.  So if you require a loan less than £2,000, you may want to consider a credit card, because if you have a good credit rating, it will be likely that with a credit card you will be able to find a low interest rate, or a 0% introductory interest rate.

Another way to consolidate your loans is through a traditional debt consolidation loan.  A consolidation loan is sometimes an unsecured personal loan that does not require any security and is considered a risky loan to lenders and are usually more expensive and not easy to get if you have a lot of debt.  A secured personal loan will require you to provide collateral, such as your home, which can prove risky to you if you are not sure if you will be able to meet the monthly repayments.

You could also seek credit counselling or debt settlement, where you will have the assistance from agencies that will negotiate with your lenders to lower your monthly payments.  They will also help you to build a budget and come up with a financial plan to help clear your debt.  However, these services come at a cost, although there are agencies that do not charge you, you will end up paying with a bad mark on your credit rating.

Debt statistics are updated monthly.  Government, banks, and loan firms use these numbers to determine how they do business.  Consumers can use these numbers to differentiate between ad copy - meant to sell products - and a real look at the UK economy

The total UK personal debt exceeded £1.25 trillion.  At the end of January 2007 it stood at £1,300bn. The growth rate increased to 10.5 per cent for the previous 12 months, or an increase of £114bn.

Total secured loan lending exceeded £1 trillion (£1,000 billion) and at the end of January 2007 it stood at £1087bn, an 11.5 per cent increase over the last 12 months.

The average household debt in the UK is £8,795 (excluding mortgages) and £53,701 including mortgages.  This is far less than IVA and debt management firms are claiming.  These numbers bring the supposed ‘debt mountain’ to a more manageable ‘hill’ – and corroborates the Bank of England’s numbers.

Average owed on loans by every UK adult is £27,638 (including mortgages). This grew by £200 in February 2007.

The average interest paid by each household this year is approximately £3,425 each year.

The average unsecured consumer borrowing via credit cards, motor and retail finance deals, overdraft loans and unsecured personal loans rose to £4,526 per UK adult at the end of January 2007.

Britain’s personal debt is increasing by £1 million every 4 minutes.

This paints a strong picture of the average UK consumer’s ability to manage their debt.  While many households are struggling under debt, many analysts believe that a good debt management councillor will serve most UK consumers better than an IVA firm.

Transferring debt from one credit card to another can be one way of helping you to manage your debt and pay it off quickly.  This is known as a balance transfer.  There are many credit cards on the market that advertise 0% on balance transfers.  If you find that your current credit card rate is too high for you to make an impact on reducing the balance, then you may want to consider transferring your balance to a credit card offering a 0% introductory offer.

If you are currently being charged a high interest rate on your card, and you are unable to make a dent in the balance because of it, you will find that you will benefit greatly by switching cards.  Before you switch cards, you will want to ensure that you are eligible for the offer.  If you are, then you will want to find out how long the 0% interest rate is being offered for.  Some companies offer a 0% interest rate on balance transfers for 3 months, 6 months, or even 12 months.  So it will pay off to shop around and find one that will offer a longer interest rate period.

Another thing to look out for when comparing offers is the handling fee that credit card companies will charge on balance transfers.  Although the interest rate may be 0%, the company will still charge a percentage for handling fees.  Often these fees can range from 2%-4% on the total amount being transferred.  You will want a card that will offer little or no handling fees on your balance transfer.  You will also want to be aware of any additional charges that the card company may charge you, and make sure you are aware of the interest rate that will be charged once the introductory rate offer expires.  Often the interest rate can be extremely high, so be aware of them.

If you are a student you will find that obtaining a loan can be extremely difficult.  It is difficult for students to obtain loans because most students are not employed full-time and do not have a sufficient level of income to meet the repayment requirements.  Many lenders consider lending to students risky, as they have to security to secure a loan, and majority of students to do have a full-time job to support the repayments of the loan.

However, if you are a post graduation student, most lenders will be willing to offer an unsecured loan to you.  Although the interest rate is higher compared to basic loans, lenders will work with the students to determine what monthly payments the student can make.  If you are a student and work a full-time job, then lenders may offer you a lower interest rate.  Lenders are more willing to allow post graduation students to borrow a sum of money if the student has employment after the school term.  Students who provide a work contract to work for a business after they graduate is a form of security for lenders.

If you are a student and require a loan, and are unable to obtain an unsecured loan from a bank or building society, there are other options.  You can look into the possibility of payday loans if you have a current bank account and a steady job, whether it is part-time or full-time, you just need proof that you are working, such as pay stubs.  Another way you can borrow is through credit cards.  However, this can be risky as you can easily fall into debt using credit cards, and if you have no credit history, credit card companies will more than likely charge you a high interest rate on the card.  If you are looking for additional funding for your schooling, it is best for you to shop around and compare prices, interest rates, and benefits from various lenders to ensure you get the best deal.

An unsecured loan is a personal loan that requires now security from the borrower.  Typically the loan value is anywhere from £1,000 to £25,000, and is borrowed for the purchase of a new car, for weddings, holidays, or other personal reasons.  Here are some unsecured loans that are currently available on the market:

Alliance & Leicester
This lender is offering an APR of 6.3% on unsecured loans between £7,500 - £20,000.  If you borrow £7,500 over 60 months period with Alliance & Leicester and you qualify for the 6.3% APR, your monthly cost will be £145.56, with a total payable amount of £8,733.60.  There is an early redemption penalty of 2 months interest charges.  You can apply for a loan online, or you can phone customer service and ask them any questions that you may have regarding the loan.

Barclays
Barclay loan plus is offering an exclusive offer to Barclay customers a fixed 6.3% APR on loans for £7,500 - £20,000 over 2 to 5 years.  To qualify for the 6.3% APR, you will have to be a Barclay customer for more than 12 months with £1,000 being paid into your account monthly, and a good credit history.  There is an early settlement penalty fee that is equal to 30 days interest that is calculated on the outstanding balance, however if you have already been making repayments for over 2 years, the fee does not apply.  You can apply for a loan with Barclay online, as well as find out additional information on the loan.

Sainsbury’s Bank
Sainsbury is offering a typical APR of 6.5% on loans for £1,000 - £25,000.  The interest rate on the loan will be fixed, and the rate will be determined on your credit history as well as your personal circumstances.  You can choose to have a 3 month repayment holiday, meaning you will not have to make any repayments for the first 3 months.  If you take out a loan for £7,500 over 60 months with a 6.5% APR, the monthly repayment will be £193.54.  The interest rate that is being offered is only available when you apply online.

If you are looking into borrowing money that is less than £5,000, there are cost effective ways of borrowing money other than a personal loan.  Depending on your circumstances and requirements, you will want to consider just how much you really need to borrow and how long of a period you wish to pay it off.  If you search and compare the alternatives to a personal loan, you will benefit greatly.

One such alternative to a personal loan is a credit card.  If you plan to borrow a few thousand pounds over a short-term, then a credit card may be a better choice for you.  By finding a card that offers 0% interest rate on purchases for six to twelve months you will benefit greatly from the card.  However, if it is cash that you wish to use then a credit card will not be a good option, as the interest rate on cash advances are extremely high putting you at risk of falling into debt.  When you use a credit card for a large purchase, you will want to ensure that you will be disciplined enough to make the monthly payments.  Also when you repay the debt on your credit card you want to make large payments to help reduce the debt, especially if the card is charging you an interest rate.

A bank overdraft is another alternative to a personal loan.  A bank overdraft is best used for short-term borrowing.  Banks and building societies tend to charge high interest rates on overdrafts, but if you plan to repay the amount borrowed within a short time then you can benefit from a bank overdraft.  When you are looking into a bank overdraft you will want to compare the interest rates that are charged by the banks.  You also want to ensure that there is no annual fee or monthly charges.

Instant payday loans are short-term loans that can be useful to those who need the money between pay cheques.  In order to acquire a payday loan you simply need an active bank account with a debit card and a regular income.  These are the only requirements needed to qualify for an instant payday loan.  Instant payday loans offer up to £1,000 depending on the individual’s monthly income.

There are some payday loan companies who use online transactions and approve online applications for loans.  With the online services, the payday loan will automatically be deposited into your checking account once your application is cleared.  A repayment plan is set up and is worked out when you apply for the loan.  Typically the loan is due the next payday, however the loan can be extended with additional fees.

Fees that are involved with a payday loan include transaction fees and interest.  Often the interest rates are higher for these loans as they require no background check and are easily available.  There are some companies, however, who charge a flat fee instead of an interest rate.  The typical cost of a loan of £100 is £15 to £20.

Payday loans are easier to obtain than personal loans, can if you need cash for an unexpected expense or bill it could be a quick fix to your problem.  However, payday loans are short-term and should not be used often.  Because of the high interest and the additional fees that are charged when the balance is extended beyond the due date, a payday loan can prove to cost you more than you intended it to.  If you are cautious and use a payday loan for the right reasons it can prove to be extremely useful.

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.