Personal Loan News

Repayments hit record high

Fri, 6 Apr 2012 15:26:00 GMT

UK consumers paid back £305 million more than they've borrowed in February, the highest such net repayment in 13 months.

The figures, compiled by the British Bankers' Association, are for unsecured lending only, which covers overdrafts, credit cards and most personal loans, but not car financing or mortgages. The repayment was mainly driven by people continuing to chip away at overdrafts and making loan repayments, but not taking as much new borrowing. Overall, new unsecured lending dropped by 1.8% over the past year.

Although credit card users repaid overall, it was by a much smaller margin: a net repayment of £39 million compared with total card spending of £7 million.

There's also been a dip in mortgage borrowing. The total outstanding debt dropped by just under two percent. The number of new loans dropped, while the number of approved remortgages fell to its lowest level since 2000, suggesting lenders are getting more picky. The drops come despite a last-minute rush to complete deals before stamp duty on homes priced £125,000-£250,000 returns this

Credit agency backtracks on renter records change

Sun, 1 Apr 2012 21:09:00 GMT

Experian has changed its mind about planned changes to the way renters sharing a property affect each other's credit records.

The company is launching a new service allowing landlords to report missed or late rent payments from tenants, which will affect their credit files and could make it harder to get future loans at an affordable rate.

Originally Experian said it would financially link people who sign a joint tenancy with one another. That would mean that, as happens with family members, one person's missed payments could affect another person's records.

After a hostile reaction from consumer groups, Experian said it had rethought the idea and agreed this linking would be inappropriate.

The company has also noted that landlords who want to use the service will need to get the permission of tenants first and allow them access to their records. Tenants can't be forced to allow their payment history to be shared in this way, but landlords can make it a condition for new tenancies.

There will also be safeguards that should stop people being penalised for late payments that are beyond their control such as delayed Housing Benefit

Missed bill payments threaten credit ratings

Sun, 19 Feb 2012 19:59:00 GMT

An estimated eight million people risked damaging their credit ratings last year by missing scheduled bill payments.

The figure comes from a survey by MoneySupermarket that found 17% of those who responded had missed a payment. Worryingly the most likely missed payment, reported by 7% of people, was for credit cards, with council tax payments missed by 4% of people.

In most cases missed payments to utility companies and local councils don't affect credit histories. However, card payments, loan repayments and monthly bills for those on mobile phone contract details can all have an affect. Missing payments could make it harder to get credit in the future, or may mean paying higher rates.

The survey also showed several misconceptions about credit ratings, with respondents incorrectly believing that being on a Child Support Agency database, changing jobs, or receiving parking fines or penalty points could affect their

Wonga agrees to limit loan rollover

Wed, 8 Feb 2012 20:23:00 GMT

"Payday loans" company Wonga has agreed to limit a tactic that allowed short-term borrowers to rollover their loans.

Wonga borrowers agree to pay back the loan after a fixed time, usually a matter of weeks, with a fixed fee and interest payment. The problem has been that many people who borrow in this way are doing so as much through a lack of income or excess of expenses rather than as a purely cashflow-related issue.

This means they are often unable to pay back as scheduled and instead are forced to roll-over a loan, meaning they are hit with a fresh set of charges. The company has now agreed to a code of practice that means it will do this a maximum of three times.

The new code is operated by the Finance and Leasing Association. However, Wonga is the only FLA member that currently offers short-term loans.

Critics say the move doesn't go far enough and fear people will simply pay off the Wonga loan and immediately take out a new one. MP Stella Creasey says the change will only work if there are controls on how often the same customer can take out a

Struggling homeowners turn to payday loans

Fri, 20 Jan 2012 20:20:00 GMT

An estimated seven million people in Britain are taking out additional debts in order to meet their mortgage or rent payments. Around a million are relying on payday loans intended for short-term borrowing only.

The figures come from homelessness charity Shelter and cover personal loans, credit card borrowing and unauthorised overdrafts; they don't include people who use authorised overdrafts to pay off their home costs. They are extrapolated from a survey of just over 4,000 people.

Shelter warned that short-term payday loans were particularly worrying as using them to pay off mortgages was "totally unsustainable." It said the high rates of interest charged to those who didn't repay quickly could leave them financially worse off and at greater chance of losing their home.

Financial experts warn that short-term loans should only ever be used for genuine cashflow problems, rather than the more fundamental issue of income being too low to cover

Payday loans firm retreats on student lending

Fri, 13 Jan 2012 19:56:00 GMT

Short-term loans company Wonga has agreed to scale back its marketing to students. It's removed an article that implied the student loan system can encourage students to get into debt.

The site came under particular criticism for what appeared to be hypocrisy. It blamed students loans for encouraging students to live beyond their means and "fritter away the money." However, it also suggested Wonga was a suitable option for buying "plane tickets to the Canary Islands" before payday.

According to Wonga, the article has been removed because it "does not actively target students as potential customers." It says the page was designed primarily for search engine marketing purposes. The company says it will still offer loans to students who meet its criteria, which include having a regular income.

The incident again raised the issue of interest rates on such "payday" loans. Wonga quotes a typical APR of 4,214%, but argues this is unfair and irrelevant as its loans are designed to be paid back within a few

Payday loans industry under debate again

Fri, 9 Dec 2011 19:37:00 GMT

A new survey suggests millions of Brits are likely to take out short-term loans to bridge the gap between paydays. But those in the industry have disputed the figures.

The survey found that 45% of people struggle to make money stretch to the next payday, a figure that's 62% for those aged 24 to 44. It also found one in six people only pay the interest on their debts and make no inroads into the balance itself.

The chief executive of the Consumer Finance Association questioned how accurate the figures are, saying that only half of people use any credit in the first place.

The government says it is working with consumer groups and the credit industry to tackle potential problems in the industry. However, officials have indicated they are wary of tightening regulation in case it deters lenders and leaves the most troubled borrowers turning to unlicensed loan sharks.

Payday loans companies have defended themselves against accusations of extremely high interest charges by arguing that the APR is a misleading measure for short term loans. The survey results, though, suggest that a sizeable number of customers may be "rolling over" loans each month and thus racking up high

Car financing now the norm

Fri, 21 Oct 2011 21:43:00 GMT

The majority of people buying a new car now do so using some form of borrowing provided by the car dealer rather than a bank or other source. The Finance and Leasing Association says 57.9% of buyers across the past 12 months did so on credit in the "forecourt finance" category.

The overall number of cars bought on finance in August was up 17 percent. The biggest rise was in leasing deals, in which the customer pays a lower monthly fee but does not take ownership of the car and instead can return it later or upgrade to a new model.

There was also a big rise in Personal Contract Purchase, a similar scheme by which customers pay the monthly fee for a set period, then either buy the car outright for a fixed amount or return the vehicle.

There's also been a small increase in the number of used cars bought with

Payday loan firms face official investigation

Fri, 30 Sep 2011 19:45:00 GMT

Consumer group Which? has reported three payday loan companies to government agencies over alleged breaches of consumer law.

The group, previously known as the Consumers Association, reported Paydaykong and Swiftmoney to the Office of Fair Trading, the former for allegedly operating without a licence and the latter for not showing the APR for its loans on its website.

It also reported Casheuronet, which operates two separate online lenders, to the Information Commissioner's Office after it appeared to pass on an applicant's details to third party marketers.

Which? made the complaints after carrying out an investigation into the payday loans industry. It says it found widespread problems with companies making misleading claims about interest rates, as well as encouraging customers to borrow more money than they needed. The group also questioned the security measures on some sites.

Some firms have fought back against critics. Wonga, which charges a 4,214% APR on loans, argues that this rate is irrelevant to most customers as they only borrow for a short period. It says borrowing £100 to ease cashflow for 15 days would cost £21.11, which going overdrawn could rack up £60 in

Debt eating into incomes

Fri, 23 Sep 2011 20:37:00 GMT

A new survey suggests the average person spends a quarter of their income on repaying personal debt -- a figure that doesn't include mortgage payments.

However, the claims by Money Supermarket don't appear to add up. The quoted figure is £322 a month, which would mean average income was around £15,500, far below most estimates.

More worryingly though, the survey asked individuals about their personal situations and found one in four people spend more than 40% of wages on personal debt, while one in twelve claimed to spend 80% or more.

The figures also showed the average total personal debt was £8,055. That's prompted financial advisers to suggest a range of measures including shopping around for good deals when taking out loans, clearing high interest debts before putting spare money into low interest savings accounts, repaying the most expensive debts first, and looking into consolidation

UK borrowers start paying off their debts

Fri, 26 Aug 2011 19:38:00 GMT

UK consumers appear to be putting the brakes on added borrowing according to new figures. It could mean better deals for those who do need to borrow.

The British Bankers Association has revealed that the total debt on consumer overdrafts and personal loans was at £52 billion in July, the lowest figure for a decade. That's even more significant than it might appear because of dramatic inflation rises over that period.

Meanwhile figures for the month showed the unusual pattern of credit card users repaying more money overall than they borrowed in new spending. The BBA believes that both sets of figures suggest consumers are trying to pay down debts -- and make interest payments more manageable -- rather than splash out on new credit-fuelled spending.

The lack of appetite for credit could mean that some lenders offer lower rates to encourage additional borrowing. However, banks may still be wary about the tough economic climate, meaning people with poor credit ratings could struggle to take

Debt worries on the rise

Thu, 18 Aug 2011 14:02:00 GMT

Brits are becoming more worried about debts, with almost half of people expressing concerns.

Quarterly figures from the insolvency trade organization R3 found that 47% of people said they were worried about debt, a figure that compares to 40 percent in the same period last year. That's had a knock-on effect with an estimated 13 million people reducing the amount they save.

There has been a change in the nature of the worries though. Credit card worries have now become more common, as have those relating to short term or payday loans, hire purchase and store cards. Meanwhile fewer people are concerned about mortgage repayments and traditional bank loans.

That's almost certainly related to the ongoing freeze on the Bank of England base rate that means even though some people are struggling with repayments, most are at least reassured that their interest fees will be predictable.

The concerns may be affecting family life, however. A separate survey by the Nationwide said nearly one in four people in relationships have a bank or building society account that their partner does not known

PPI complaints rise dramatically

Mon, 8 Aug 2011 19:38:00 GMT

April's court defeat for the bank industry over payment protection insurance claims has led to a flurry of new complaints.

The Financial Ombudsman Service has revealed that between April and June this year, there were 56,000 PPI complaints. That's around 900 a day, more than double the rate in the same period last year. In all, PPI was the subject of almost 70% of all claims to the ombudsman, almost 10 times as much as any other area of finance.

Not all of the additional claims are justified though. During the April-June period, 55% of PPI claims were upheld. That's down from 66% in the 2010-11 financial year and 89% for 2009-10. But even with that drop, PPI remains one of the subjects more likely to have complaints upheld, ahead of topics like mortgages and most forms of insurance.

The FOS predicts that both the number complaints and the number of upheld cases should continue to rise this year as the backlog that built up through banks awaiting the court ruling continues to

Borrowers savings could be raided if repayments on mortgages, credit cards or loans aren't made

Fri, 22 Jul 2011 19:58:00 GMT

Borrowers have been reminded about the increasing risk that their savings could be raided if they fail to make repayments on mortgages, credit cards or loans.

Longstanding rules mean a bank has the right to "set off" outstanding debts in this way if a borrower also has a savings or current account with the same bank. However, many people don't realise that this rule can apply across an entire banking group that operates several organizations.

That's becoming more of an issue with the recent series of mergers and acquisitions in the industry. The matter has come back to prominence with the Nationwide sending out a warning letter explaining that it owns the Cheshire, Derbyshire and Dunfermline building societies as well as UCB Home Loans. Another example is that Lloyds now owns the Halifax, Bank of Scotland and Cheltenham & Gloucester among others.

Consumer experts have noted that there's usually no need for the rule to be stated in terms and conditions, and that banks can make the withdrawal from the account without warning. However, while the full credit card balance can be taken, only the outstanding loan payment amounts can be removed in this

Borrowers making repayments... for now

Mon, 11 Jul 2011 14:49:00 GMT

The governor of the Bank of England has warned that figures showing an apparent drop in the credit default rates may be misleading.

New bank figures should that while credit card payment defaults rose during the April-June period, those for secure loans remained steady and those for unsecured loans actually fell.

However, the bank predicts that all default rates will rise over the summer, pointing to a likely lack of money for making repayments thanks to a combination of wage freezes, tax rises, inflation, cuts to benefit payments and redundancies.

Meanwhile the Council of Mortgage Lenders is forecasting a 25% rise in repossessions between 2010 and 2012. That follows a Bank of England warning that lenders may be understating the proportion of mortgages that are at serious risk of sustained default.

The likely outcome is that lenders will become more wary about issuing new loans, with a risk of higher interest rates and tighter credit checks on potential borrowers, making shopping around for a deal even more

New loan deal can leave credit record untouched

Sun, 3 Jul 2011 19:32:00 GMT

The Nationwide has launched what it is billing as a commitment-free loan. That means that, unlike the vast majority of credit facilities, the application process doesn't appear on your credit record unless and until the customer takes up the loan offer.

The idea is to get round the common problem that applicants don't know the precise interest rate they'll be offered until after their application has been made and processed. If the offer isn't as good as they hoped, they face a tough choice between taking a poorer deal or rejecting it and applying elsewhere, at which point the previous application may count against them on their credit history.

It should be noted the Nationwide will naturally record the application and credit check if the customer takes up the loan offer. As with any form of credit, this will affect future applications.

The Money Saving Expert site noted this week that the Nationwide feature is particularly attractive given that since earlier this year the advertised rate only has to be offered to half of all applicants rather than the previous

Interest rates rise despite official freeze

Wed, 29 Jun 2011 11:14:00 GMT

The rates banks charge on loans and credit cards is continuing to rise despite the ongoing freeze on the base rate, a financial analyst reports.

The Bank of England base rate, which effectively determines how much it costs banks to get hold of the money they then lend to customers, has remained at 0.5% since March 2009. That's an all time low: in fact the rate had never been lower than 3.5% in the bank's history until late 2008.

However, Defaqto has found that average personal loan rates have risen almost 50% in the past four years, from 8.1 percent to 11.8 percent. Meanwhile credit card rates now average 18.6% -- the highest premium over the base rate on record.

The good news is that this gap means there's much more variation in the rates on offer from different lenders, meaning those who shop around should find good savings. The bad news is that some of the disparities are down to different lenders targeting different audiences, meaning those with poor credit histories may pay a particularly high penalty at the

"Near-prime" borrowers getting more options

Sun, 12 Jun 2011 10:25:00 GMT

Some lenders are beginning to offer more deals to prospective borrowers whose credit records are not perfect but contain only relatively minor infractions, according to a report in the Independent on Sunday.

The newspaper notes that major high street banks are still often applying a zero tolerance policy to those who've breached previous credit violations. That's a hardline reaction to the 2007-8 subprime crisis where people with poor credit records and low incomes who received loans began defaulting in unexpectedly high numbers.

Those stark policies have meant people are sometimes turned down even when they've simply missed a single payment on a credit card or utility bill, perhaps through an oversight rather than financial problems.

The good news is that such customers, dubbed "near prime" may now be able to find deals from less well-known lenders such as those arranged through a mortgage broker, with the firms seeing this as a gap in the market. The bad news is that the deals may carry a slightly higher rate than normal, or require a significant deposit. As a result, getting specialist advice may help make sure borrowers get the best possible

"Near-prime" lenders getting more options

Fri, 10 Jun 2011 13:43:00 GMT

Some banks are beginning to offer more deals to prospective borrowers whose credit records are not perfect but contain only relatively minor infractions, according to a report in the Independent on Sunday.

The newspaper notes that major high street banks are still often applying a zero tolerance policy to those who've breached previous credit violations. That's a hardline reaction to the 2007-8 subprime crisis where people with poor credit records and low incomes who received loans began defaulting in unexpectedly high numbers.

Those stark policies have meant people are sometimes turned down even when they've simply missed a single payment on a credit card or utility bill, perhaps through an oversight rather than financial problems.

The good news is that such customers, dubbed "near prime" may now be able to find deals from less well-known lenders such as those arranged through a mortgage broker, with the firms seeing this as a gap in the market. The bad news is that the deals may carry a slightly higher rate than normal, or require a significant deposit. As a result, getting specialist advice may help make sure borrowers get the best possible

Credit market getting tougher

Sat, 4 Jun 2011 15:46:00 GMT

An increasing number of people are being turned down for credit. And the picture is worse with secured credit.

According to Credit Confidential, just short of 2.5 million people in the UK have had a credit application rejected in the past six months. That's a 10 percent rise on the same period last year.

Meanwhile the acceptance rate for applications for secured loans (such as mortgages or car finance) has dropped to around a third. While that's better than the worst point of the credit crisis, it's very low by historical standards.

While part of the problem is ongoing reluctance by lenders to take on too much risk, Credit Confidential believes a major factor is that would-be borrowers are failing to check their credit records to look for mistaken information or even identity fraud.

Another contributing factor is that many people turned down for a loan simply try again elsewhere, not realising that a string of unsuccessful applications can create a vicious circle as application history is taken into account when assessing a loan: in effect, too many and too frequent applications comes across as

PPI scandal leads to new scam

Sat, 21 May 2011 15:50:00 GMT

People who have taken out loans and credit agreements have been warned to steer clear of companies offering to help claim back payment protection insurance premiums.

The companies have been sending out promotional text messages claiming their records show the person is entitled to a particular amount, usually £3,750. It appears the companies do not have any such records and are simply sending them out to every number they can get hold of, working on the basis that it doesn't matter if most of the messages are wasted as long as a few customers get picked up.

Once people reply to the message, the company will offer to help make a PPI claim, in return for a fee which can reach 25% of the amount the person eventually wins back from a lender.

Consumer experts have noted that in the vast majority of cases, customers will have no problems carrying out the paperwork to make a claim themselves and that the claims handling companies will be taking a large amount of money for very little

Debt busting text offer appears to be both spam and scam

Fri, 8 Apr 2011 20:22:00 GMT

People experiencing problems repaying loans and credit card bills need to be particularly wary of a scam spreading by text message.

An unsolicited text message doing the rounds reads "Due to a new legislation, those struggling with debt can now apply to have it written off. For more information text the word 'INFO' or to opt-out text stop." Other variants refer to "debt settlement order" or "debt relief order."

It appears the scam has nothing to do with the subject of the text itself. It's simply an attempt to trick vulnerable people into replying and unintentionally "authorizing" the company to send further messages that entail charges for the recipient. Furthermore, there is no new legislation and no such thing as a "debt settlement order".

While there doesn't appear to be any debt help on offer here, previous similar marketing has involved the Individual Voluntary Arrangement. This is a legally binding contract between a person and their creditors, with the person agreeing to pay a set fee each month for a fixed period, after which all remaining debts are written off. While such deals are legitimate, they are only suitable for a small proportion of people, and can often be missold by third-party

Credit cooling off period doubles

Fri, 18 Mar 2011 19:19:00 GMT

British borrowers now have twice as long to change their minds after taking out a loan or credit facility. The protection now covers all forms of credit agreement.

Previously borrowers could only change their minds when they had taken out a credit deal through the post or online, which qualified them for the standard seven-day cooling off period for such distance selling. Buying in person came with no such option.

Under the European Consumer Credit Directive that is now in force in Britain, there's now 14 day period for any form of credit agreement, which includes loans, credit cards and store cards. Borrowers can cancel an agreement during these 14 days without having to give reason. However, they will have to repay any borrowing in full, plus any interest that has accrued since the loan was taken out.

Debt after divorce a growing issue

Fri, 18 Feb 2011 14:27:00 GMT

Debt support groups are reporting a widespread problem with people being lumbered with the debts of ex-partners.

According to the Consumer Credit Counselling Service, many of the requests for help it gets come from people with joint financial accounts who have either separated or divorced.

It told the Daily Mail that many such people failed to realise that not only do such financial ties remain in place even after a split, but that they operate on a "joint and several liability" basis, meaning either partner can be held legally responsible for the full debt.

The group warned that people should be very wary about taking out joint accounts or loans in the first place. It also noted that immediately after a split, people should close joint accounts, both for borrowing and lending.

Part of the confusion lies in the fact that living together or being married does not itself create a financial link when it comes to credit records. However, once two people take out a joint account, their credit records will be linked for six years unless the account is closed and the credit ratings agency

MPs in muted call for loan rate restraint

Fri, 4 Feb 2011 21:08:00 GMT

Parliament has stopped short of a motion demanding a limit the levels of interest lenders can charge. But MPs did back a call for regulators to "consider" a cap in some circumstances.

The original motion, brought by Labour's Stella Creasy, would have urged the Government to immediately bring in caps on "areas of the market in unsecured lending which are non price-competitive" -- in other words, where so-called "loan sharks" take advantage of people who can't get credit from mainstream sources.

Although the motion wouldn't have changed the law, it would have put strong pressure on the Government to act.

MPs did eventually vote in favour of the motion, but only after backing an amendment by Conservative Robin Walker which changed the demand from putting caps in place immediately to considering a cap. He said that with a government review already looking at financial regulation, now wasn't the time for new legislation.

Business minister Ed Davey, speaking in the debate, said he believed caps could deter lenders and leave some borrowers unable to access legal credit at

New euro-rules could mean loan rate shocks

Sun, 23 Jan 2011 19:16:00 GMT

As of 1 February, millions of people could find themselves applying for loans only to find they get offered an unexpectedly high interest.

That's the date that a European directive on credit advertising takes effect in the UK. It means that existing laws that say advertised rates should be offered to at least 66% of people who apply will be replaced by a new figure of 51%.

While it may seem odd that a European law could weaken consumer protection, the new rules are being strictly imposed, the argument being that it makes a level playing field for insurers across the continent.

Borrowers have been advised that the move makes it more important to check credit records are accurate, and take steps to improve credit ratings. This should decrease the chance of getting offered an unexpectedly higher rating and having to choose between taking it, or having to reapply with a new lender, which could further harm credit

Mortgage struggles prompt loan shark warnings

Fri, 14 Jan 2011 19:41:00 GMT

Homeless charity Shelter was warned that the number of people using a credit card to pay their mortgage is on the rise. That's prompted warnings for those in such trouble to avoid unscrupulous and unlicensed lenders.

According to the Shelter report, 6% of the homeowners it surveyed said they had used a card to make mortgage payments. If that figure is accurate, it's equivalent to 2.6 million people across the country. The proportion is up from 4% when the charity carried out the same survey in November.

The group said that using cards was the worst possible method to cover mortgage shortfalls (of legal methods at least), noting that credit cards are mainly designed for short-term borrowing and carry some of the highest interest rates for borrowing. It said homeowners in such financial problems should contact the bank or building society to see if a more affordable arrangement can be made.

Meanwhile the Scottish Illegal Money Lending Unit warned that illegal lending is a serious problem, with an estimated 150 loan shark firms operating in Scotland alone, some charging the equivalent of 10,000,000% APR. It said those in small amounts of debt should consider the services offered by credit

Borrowers warned over credit record errors

Fri, 31 Dec 2010 11:57:00 GMT

The Consumers' Association has warned that mistakes on credit records could be more widespread than previously thought. This could mean potential borrowers being unfairly refused credit or offered higher rates.

According to the CA's magazine Which?, one in eight of its members who have checked their records have discovered a mistake. It is worth noting that this may be a little higher than the overall proportion as some of those people will have checked records specifically because they suspect an error, rather than merely making a routine check.

The association said credit agencies gave two main mistakes for errors: incorrect information passed on by former lenders, and reports still showing now outdated financial associations. These are where the financial activities of two people are linked on credit histories, for example among members of a family living at the same address.

Customers who discover a mistake can ask the credit agency to correct the details, supplying evidence if required. In the event that the agency refuses to update the record, for example where there is a dispute about the facts, the customer has the right to have a note attached to their record, stating their version of the

Bo-Jo In Big Ben Bong Wonga Ding Dong

Thu, 23 Dec 2010 18:56:00 GMT

London Mayor Boris Johnson has criticized the fees charged by a loan company that's sponsoring New Year's Eve transport.

Wonga.com, a short-term or payday loan company, is covering the costs of bus and underground travel in London between 11.45pm and 4.30am to allow revelers to make it home on the big night. Given the state of the economy and concerns over debt, that's led to harsh criticism from people pointing out that Wonga's interest charges are the equivalent of 2,689% a year.

Interviewed on LBC radio, Johnson defended the sponsorship deal and stressed that the company was licensed to lend money and does not breach British laws. However, he added that "people should be aware of the extortionate rates of interest that they can charge and people should not enter into irrational and unwise debt obligations.”

Wonga argues that the 2,689% figure is misleading, and simply the result of a standard approach to calculating and expressing interest rates. It charges 1% for each day between the loan being taken out and being repaid, up to a maximum of 60% of the loan value.

However, pressure group Debt on our Doorstep said that such charges trapped poorer borrowers who were able to

Banks aren't always the cheapest for loans

Sat, 11 Dec 2010 14:30:00 GMT

The Consumers' Association has warned that major banks are often not the cheapest sources for loans. Instead it suggests supermarkets and lesser obvious banks could be a better bet.

According to the group, while Sainsbury's and Tesco both charge 8.7% APR on a £5,000 loan over three years, some high street banks charge more than twice as much. Even the lowest bank rates on offer elsewhere are significantly higher: the 12.9% that appears to be standard for at least five major lenders. That would cost almost £350 extra in interest charges.

There are two banks offering rates similar to the supermarkets: Santander and the Post Office banking service both charge 8.9%.

It's important to note the figures apply to unsecured loans meaning that, unlike mortgages or car finance, the borrower doesn't put anything up as security. This is why personal loans are more expensive than home loans.

The CA also noted that because bank loan rates decrease as the loan amount increases, customers looking to borrow smaller amounts over a relatively shorter time may find it cheaper to go for options such as a credit card with an introductory low rate or zero rate period. But with such schemes, it

Payday loans market set for boom

Wed, 20 Oct 2010 11:46:00 GMT

A market analyst has predicted the amount borrowed by Brits through Payday loans could triple in the next four years.

Last year the total borrowing on such short-term, high-interest loans was £1.2 billion. Datamonitor forecasts that figure will be between £2.7 billion and £3.5 billion.

The company puts this down to economic concerns, though not simply through unemployment. Instead it will be partly because of people becoming more wary about long-term debts, even at more affordable rates.

Another factor is an increasing number of people working on a part-time basis, including those paid by the hour. This makes it more likely that people will have fluctuating incomes from week to week, which increases the chances of them experiencing cashflow problems.

Datamonitor believes this increased demand could attract new lenders to the business, which may at least increase competition and give borrowers (comparatively) better deals.

The company also noted that there have been "catastrophic" declines in the industry for secured loans, which offer lower rates but require the borrower to put up property or possessions as security and risk losing them if they fail to repay the money. The total lending on such a basis has dropped by 95% since

Loan cost battle bottoms out

Wed, 22 Sep 2010 16:27:00 GMT

A short-lived price war among financial firms offering personal loans appears to be over. Three major lenders cut some rates by a sliver in recent weeks, but rates look set to remain unfavorable.

The three cuts, reported by Money Saving Expert, were all extremely similar, fueling speculation they were down to a very slender degree of competition. All three rates are for loans between £,7000 or £7,500 and £14,999.

Tesco made the biggest cut, though it was still a mere 0.2 percentage points: 7.9% down to 7.7%. Sainsbury's, which was on 7.8%, is now offering 7.7%, though that discount is for Nectar card holders only. Meanwhile the Nationwide Building Society is offering the same 7.7%, but will drop to 7.6% for current account holders.

Given that it looks so clear the lenders are following one another's lead, and considering how small these cuts are, it appears personal loan rates have "found their level". Over the past three years, personal loan rates have risen while Bank of England base rates have plummeted.

That's a strong indication that rates offered to customers are now much more to do with what banks think people will pay than with what it costs banks to get