Credit Mad Britain

[aafc01]

Originally Posted by Graham

The problem is that, at the moment there is insufficient regulation of the credit lenders so that it is too easy to a) get credit and b) get into serious debt.

Yes, ok, I don't deny that some people get themselves into trouble, but when there are people begging you to take their cards and effectively offering inducements (low introductory rates etc) to persuade you, it's not difficult to see how people can be suckered into taking out more credit than they can repay.

Of course by the time they *realise* it, they're so deep in the s$$t that there's very little they can do to get out without *further* borrowing.

1. All lenders come under the scrutiny of the Office of Fair Trading or Mortgage Code Compliance Board or Financial Services Authority.

2. Whenever someone gets into trouble, they always have brought it upon THEMSELVES.

3. It is quite simple to simply shred the "pre-approved" platinum card application you know. Nobody holds a gun to your head and makes you fill it in.

4. Anybody who borrows tens of thousands on CC's and is daft enough to believe it doesn't need paid back is stupid enough to go to a money lender instead.

5. If you think CC's have a high interest rate....

[aafc01]

Originally Posted by Graham

[snip]
Too many people are already lying on Self-Certificated mortgage applications, saying they're earning as much as two or three times their real income, to get a mortgage, but if interest rates go up by another percent or two, they're going to find themselves in severe problems trying to repay their loans.

Don't believe everything you see on the BBC.....

[aafc01]

Originally Posted by gary_580

Trouble is there is all this new credit with people consolidating loans. Does it take into account the loans that are paid off?

I think they should kill these adverts on day time TV "Consolidate your loans and reduce your monthy payments" why does it reduce your mnthly payments? cos your paying it over a longer period of time and paying more!!!! Too easy for people to get sucked into that one. They consolidate and then what do they do? Borrow more cos they can then afford too.

How does it reduce monthly payments?

Quite simple

1. You owe say 20K on a card at 18.9% ( a typical rate)
2. If you make minimum payments (2-3%) that will take in excess of 16 years to clear.
3. Switch to a lower card (there are ones @ 9.9%), the interest you are being charged is simply cut in two. Still takes 12+ years to pay off mind
4. To *really* save money, remortgage down to 4+%, interest being charged is cut by a factor of 4.
5. Yes you are paying for it over the length of the mortgage, but you WERE DOING THAT ALREADY....
6. The really *SMART* thing to do, is not to take all the savings, leave some of it on the table and pay the entire mortgage off early....

..and yes, it is my job.

[aafc01]

Originally Posted by kronas

there is no accurate figure for the amount of self certificated mortgages, although it sits at about 30-40%, most people rely on the interest rates to stay low, atthe current conditions of over borrowing through credit and mortgages, the assessment is rates will be going up.

I work in the mortgages industry, in the area I work, the level of self-certs is less than 10%.

People are NOT allowed to over borrow on mortgages, it is strictly regulated (by the mainstream lenders) and there is a limit on what you can borrow.

Earn less than 20K? - 3.5x salary plus second salary
Earn more than 20k? - 4x salary plus second salary

[kronas]

Originally Posted by aafc01

I work in the mortgages industry, in the area I work, the level of self-certs is less than 10%.

thats in your area, i was talking about the total number.......

Originally Posted by aafc01

People are NOT allowed to over borrow on mortgages, it is strictly regulated (by the mainstream lenders) and there is a limit on what you can borrow.

lenders regulate ?

your having a laugh

Originally Posted by aafc01

Earn less than 20K? - 3.5x salary plus second salary
Earn more than 20k? - 4x salary plus second salary

no people easily get away with getting them through brokers, some get them through lenders who DONT do the necessary checks

[punky]

The smart thing to do if you owe £20k on CC is to take up the introductory offers. It seems like regardless of time, there are always a number of credit card companies that will offer 0% on balance transfers, for either X months or if you're lucky, for the life of the balance. Surely, if you don't mind a bit of paperwork, you can punt your balance around from card to card, and never pay interest again?

Originally Posted by kronas

there is no accurate figure for the amount of self certificated mortgages, although it sits at about 30-40%, most people rely on the interest rates to stay low, atthe current conditions of over borrowing through credit and mortgages, the assessment is rates will be going up.

The thing is, *I* have a self-certificated mortgage, but that's because, when I took it out, I was self-employed and, as such, didn't have the three years of business books that mortgage companies were demanding.

However, having said that, I didn't extend myself beyond my means (in fact quite the opposite), nor would I ever do so, because I've got more financial sense!

Originally Posted by Incognitas

The real answer is to refuse to have a CC and to SAVE up for what you want.It seems like everyone thinks they MUST have a CC.Why? Surely the only credit one needs is the mortgage that you have on your home.Why go looking for any other credit?

It's not quite that simple though.

For instance, as I'm sure I've mentioned before, with a credit card, if you buy something between £100 and £30,000 , you get the protection of Section 75 of the Consumer Credit Act which makes the card issuer *jointly and severally* liable for the purchase.

This means that even if the company you buy from goes bust, you can still claim recompense from the card issuer.

I'm pleased to say that I owe money to no one least of all the greasy,groping loan companies and CC companies who are the very worst at leading folk onwards down the slippery slope by increasing credit limits without discussion,hiding behind complicated interest rates by using unclear,complicated jargon to confuse the unwary.

Whereas I *do* owe money to a CC Company, but only because, when I moved into my new flat about 2 1/2 years ago now, I ran up all my debts onto my credit card, however from then on every six months I've been shifting the balance onto another 0% deal card which means that I've been paying off the minimum amount and had the equivalent of a £4000 interest free loan for that period!

Oh, and the money to pay it off is sitting in an account currently getting 3.75% gross interest...!!

I also have another credit card which I use if I need to buy a "big" item, or something from abroad etc, but I use the "up to 56 days interest free" period to the maximum, then pay off the balance at the end of that time!

Credit cards etc are not necessarily a bad thing, you just have to know how to make the system work for you

Cheers,
Graham.

Originally Posted by Ramrod

Very good post. We buy everything on cc and pay it of when the bill arrives. We get free insurance (as you said) and 'nectar' points

Just a point, however, "nectar" points and other such schemes are, frankly, virtually worthless.

If you look at just how much you actually have to spend to get anything worthwhile you'll realise that the return is a fraction of one percent, which is even worse than the "money back" schemes that pay 0.5% and are only useful if you spend huge amounts on your card.

Originally Posted by aafc01

1. All lenders come under the scrutiny of the Office of Fair Trading or Mortgage Code Compliance Board or Financial Services Authority.

Yes, however some recent debacles have shown how poor that scrutiny can often be.

2. Whenever someone gets into trouble, they always have brought it upon THEMSELVES.

That is IMO excessively harsh. Lenders often use what can best be described as "confusion marketting" techniques.

For instance if they give you a card that offers "0% on balance transfers for 6 months" how many people would look for, or *know* to look for something that says that if you pay off any amount on the card, it goes to pay off the *transferred* balance *first*, whilst all new transactions are running up interest?!

3. It is quite simple to simply shred the "pre-approved" platinum card application you know. Nobody holds a gun to your head and makes you fill it in.

If you do not *ask* for an increase in your credit limit on a card, you should not be *offered* an increase. Nor should you even be given one without asking! (On a related point, some years ago, Nat West kept trying to up the "credit zone" on my bank account, whether I wanted it or not).

4. Anybody who borrows tens of thousands on CC's and is daft enough to believe it doesn't need paid back is stupid enough to go to a money lender instead.

A lot of people simply do not *realise* how quickly debts can mount up until it's too late.

5. If you think CC's have a high interest rate....

Yes, I know there are store cards that have 30% plus interest rates. There are also "roll up" home equity release schemes that have left people tens of thousands of pounds in debt because they weren't told the full details before they took them out.

To blame people for falling for these sorts of things without levelling equal or much greater criticism on those who peddle them is, IMO, simplistic.

Originally Posted by aafc01

Don't believe everything you see on the BBC.....

If you have cites to contradict this, please, let's see them.

The fact that The Money Programme was able to go into half a dozen different brokers etc and get specific instructions on how to fiddle the self-certification system is pretty telling.

Originally Posted by aafc01

4. To *really* save money, remortgage down to 4+%, interest being charged is cut by a factor of 4.
5. Yes you are paying for it over the length of the mortgage, but you WERE DOING THAT ALREADY....
6. The really *SMART* thing to do, is not to take all the savings, leave some of it on the table and pay the entire mortgage off early....

..and yes, it is my job.

However you don't point out that there are two important assumptions in the above scenario:

1) That you *own* property that you can mortgage and

2) That you're willing to take the risk of losing that property if you can't make the payments.

I'm not saying it's a bad thing, but these things *do* need to be considered.

Originally Posted by dellwear

I thought it was a Tory policy to allow people to run their own lives, and for governments not to interfere??

But you are right, it cant be sustained, people do need to learn that you do have to pay all that "free" money back

Yep, this cloned tory government we have now will have to introduce some laws regarding borrowing methinks, unfortunately a lot of people need to be guided at times rather than run their own financial affairs.

[Shaun]

Originally Posted by yesman

Yep, this cloned tory government we have now will have to introduce some laws regarding borrowing methinks, unfortunately a lot of people need to be guided at times rather than run their own financial affairs.

I'd be happy to see further regulation of the finance industry brought in, but I didn't think people wanted a "nanny state"!!

Originally Posted by dellwear

I'd be happy to see further regulation of the finance industry brought in, but I didn't think people wanted a "nanny state"!!

There is a difference between a "nanny state" saying "you shouldn't see/ watch/ do that because it's bad for you" and the state regulating an industry which seems intent on forcing you to play "find the lady" if you want to use their products at all.