Category: News

There are many reasons why people are discouraged from applying for payday loans, not least the four figure interest rates that they tend to attract, and sub-prime mortgage lender GE Money has added further fuel to the fire by declaring that they refuse mortgage applications from those that have taken out a payday loan in the past three months.

People on a low income can find it difficult to get credit and, in a lot of cases, this has led them to apply for payday loans. Unfortunately, such an emergency loan can attract exceptionally high interest rates and a failure to make repayments often leads to even greater repayment demands. This has led some borrowers to taking out multiple loans in a bid to try and recover from the situation. Many groups and lobbies advise against the use of these loans and for seemingly good reasons.

Another reason that has presented itself is the news that at least one mortgage lender considers the use of payday loans to be a negative sign.

GE Money, a mortgage lender that specialises in the sub-prime market, has said that they will refuse an application from anybody that has taken out a payday loan in the past three months.

This not only includes people that have struggled or failed to make repayments on the loans but even those that met the repayment schedule and didn’t struggle to pay back the loan.

Nationwide have also said that payday loans may have been a factor in calculating whether a person was a credit risk or not, but went on to say that they would not turn down an application based solely on the fact that a person has applied for a payday loan. According to MortgageRates.org.uk, HSBC have said that they do not differentiate what type of debt a person has. The site also points out that some lenders may be using payday loans as a sign that an individual is not a creditworthy borrower.

Fortunately, there are alternatives to using payday loans. A budgeting loan is a tax free loan made available by the government via Jobcentre Plus. Those on certain benefits are able to borrow up to £1,500 for any of a variety of reasons and the repayments, which are taken directly out of benefit payments, are made over a period of up to 2 years. If eligible, these Social Fund loans can prove essential help when borrowers need it most.

Read more about budgeting loan eligibility.

The number of people that are declaring themselves bankrupt has reached its lowest rate since 2003 but the number of people taking out recently introduced DEOs has risen.

Bankruptcy should be considered a final option and should only be followed once all other options have been thoroughly explored. While it will clear the majority of debts a person holds, it will remain on your credit file for as long as seven years and it will be very difficult to find any form of credit that you will be accepted for during this period. It can even become difficult to get a bank account or a mobile phone contract.

27,390 personal insolvencies were registered in the second quarter of 2012 which represents a drop of 10.2% on the same period a year ago. However, there has been an increase of 10% on the number of people that have taken out a DRO; the cheaper alternative to bankruptcy which is aimed at those with debts of less than £15,000 and be on a low income.

A Debt Relief Order is cheaper than bankruptcy, which costs £700.

Another alternative to bankruptcy is an IVA. In an IVA, debtors reach agreement to pay a reduced amount of their debts to creditors. This type of arrangement has become more popular and the number of people taking out this alternative product has also dropped by 7%. Despite this drop there are still more people that have taken out an IVA than have declared bankruptcy.

 

 

A government think tank has suggested that the most expensive social housing in the most expensive regions should be sold off in order to make money that can be used to build more housing in under-privileged areas.

Alarmingly, research showed that approximately 1 in 5 social housing properties have a value more than the average house price in that area. This is equivalent to more than 800,000 properties, and a think tank has said that selling these homes would raise a staggering £4.5bn. The report suggested that the money raised should go straight back into building property and that it would be enough to build 170,000 social homes a year.

Approximately 3.5% of these expensive social houses become vacant every single year and the report says that this is the ideal time to sell it off in order to raise additional cash; money which can then be used to pay for additional, cheaper housing.

The ideas have met with scrutiny and praise in equal measure. Housing Minister Grant Shapps has described the plan as blindingly obvious.

Other findings in the report state that spending guidelines should be introduced that will help ensure stock-quality standards are driven higher. Shapps went on to say that it makes sense to use social housing stock as efficiently as possible and that it was merely leftwing dogma that was preventing this new plan from already being implemented.

The Eurozone crisis does not look set to abate any time soon as new figures show that unemployment reached a new all time high of 17.56m. The figures do not look good for individuals or businesses and indicate that companies are preparing for the worst as they look for additional ways to cut their budgets. However, the picture in the UK is not quite as gloomy as it showed a drop in unemployment, down to 2.61m in the three months ending April.

With massive unemployment rates in countries like Spain, where approximately one quarter of all people are now unemployed, it is perhaps little surprise that the Eurozone is faring so badly. In total, 11.1% of people in Eurozone countries are now without work which signifies the lowest rate since records began back in 1995 and shows that the region is far from out of the crisis that has been threatening many countries.

The UK has performed a little better although a UK unemployment rate of 8.2% still indicates a large portion of the workforce currently out of work. What’s more, the number of people claiming Jobseeker’s Allowance has risen by 8,100 people and 1.6 million people claimed the benefit in May 2012.

Poor unemployment inevitably leads to a greater number of individuals and families that fall within the low income threshold. Such families will find it more difficult to meet regular payments and the government backed Social Fund scheme is designed to help such individuals and their families.

The Social Fund offers interest free crisis loans and budgeting loans that can be used to pay for things like household bills, new clothes, and other emergencies that would not otherwise be available. There are some criteria that need to be met for each of these types of loan but they provide a viable means of paying for essential items, for those families that are at highest risk. As unemployment remains at high levels, the number of people relying on budgeting loans and other Social Fund loans is likely to continue increasing.