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Solution Loans Personal Finance Blog

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  • Lisa Kleiman
  • July 27, 2016 07:56:58 PM

A Little About Us

Why are some people better at saving money? Could your pension be at risk? How to kick start your business with a guarantor loan? Find out the answers to these questions and more from the independent loan broker Solution Loans, with lots of money saving tips and expert financial advice on a range of issues, from family budget travel to cheap home improvements and more.

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    The Top Financial Scams of 2021 and How to Avoid Them

    Financial scams have been on the rise in the UK for years and the Covid-19 pandemic may have made matters even worse. From identity theft and Covid-19 financial-support scams to fake parcel deliveries, financial fraud is evolving and taking lots The post The Top Financial Scams of 2021 and How to Avoid Them appeared first on Solution...

    Financial scams have been on the rise in the UK for years and the Covid-19 pandemic may have made matters even worse. From identity theft and Covid-19 financial-support scams to fake parcel deliveries, financial fraud is evolving and taking lots of different forms depending on the intention of the scammers.

    Data from Action Fraud shows a whopping 33% year on year rise in fraud and cybercrime cases for the period between April 2020 and March 2021. Detailed reports show how victims in England, Wales and Northern Ireland lost over £2.3bn in the period under consideration as the number of cases reported climbed to 413,553.

    A separate research report by Citizens Advice revealed that over 36 million UK adults have been targeted by scammers since January 2021.

    Online scams and fraud

    Considering these and many other fraud reports, it is important that you know the latest in the financial scams universe and how to protect yourself. Here are some of the most prevalent scams in the UK and what to do to minimise your risk of being a victim.

    Online Shopping and Auctions Fraud

    This category of fraud is by far the biggest threat especially during the pandemic as more and more people pivot to online shopping to get their supplies. Some of the victims reported how they bought things online which were never delivered or sold items for which payment never came through.

    As part of the fraud schemes, buyers may also receive items of poor quality, different from what was advertised. Others may be charged for hidden costs or even subjected to shill bidding where they end up paying inflated prices in bidding wars. The data from Action Fraud showed a 65% year on year increase in the cases reported in this category.

    Covid-19 Financial-Support Scams

    Right from the early months of the Covid-19 pandemic, the UK government put in place financial relief measures to cushion business enterprises and individuals. Among the financial help schemes put together were cash grants, loans, job support schemes and test and trace support payment programs.

    Unfortunately, scammers discovered loopholes in some of these support schemes thus using them to target their victims. The fraudsters often send Covid-19 relief fund claim forms via email or social media platforms to collect personal information including credit card details. Some of the emails look as if they are from government departments and have links leading to sites that collect personal information.

    Fake Loan Fraud

    Scam artists and fraudsters have been targeting vulnerable members of the public with fake adverts for fast loans. The promise is that the victims could be approved even with bad or no credit history.

    However, before the loans are approved and processed, the victims are asked for advanced fees to cover the loan insurance and other payments. Once the scammer receives the upfront fee, they usually stop communicating and even their lines may go off.

    Pension Scams

    Following the enactment in April 2015 of the Pension Freedoms legislation, UK pensioners now have the flexibility to access their Defined Contribution (DC) pots starting from age 55.

    Between 2017 and August 2020 pension scammers defrauded their victims over £30 million, according to data from Action Fraud. With company dividends dwindling or suspended, savings rates at rock bottom and stock markets showing unprecedented volatility, some pensioners have become susceptible to fraudsters offering them ‘high guaranteed returns’ in alternative investment schemes.

    Other pension scams are structured in a way to convince pensioners that they can access their retirement funds before they hit 55 years of age. This can expose their withdrawals to huge tax charges thus losing out on their hard-earned funds. Some scammers may even make loan or cashback offers against pension pots and pressure you into making quick decisions.

    Online Banking and Card Fraud

    This type of fraud is not new, but the unique challenges posed by Covid-19 have made card transactions skyrocket. According to UK Finance, a trade association that brings together the UK banking and financial services sectors, a total of £574.2 million was lost through UK-issued cards in 2020.

    A big chunk of this was orchestrated through card-not-present (CNP) transactions via phone and online. Fraudsters may steal card information physically or electronically and copy the cardholder’s name, account number, card expiration date, billing address and other useful information. Using these details, they can transact online or via phone.

    Between April 2020 and March 2021, Action Fraud reveals that over 27,773 incidents involving cheque, card, online banking fraud have been reported. The total cost of these cases has been put at £183.9 million.

    How to Avoid Financial Scams

    Having seen how the scams are engineered the losses involved and how the victims are targeted, here are some tips to help you avoid them.

    1. Be suspicious of get-rich-quick schemes and deals that appear too good to be true.
    2. Avoid making or being forced to make hasty decisions especially involving payments. Take time to seek independent advice and if possible legal opinion before entering into any agreement or disclosing confidential information.
    3. Never send money to a person or an entity you don’t trust. This includes sending banking or personal information or using payment methods that you don’t fully understand.
    4. Instead of clicking on links attached to emails, visit the concerned websites, and log on directly using their official URLs.
    5. Beware of glowing or exaggerated testimonials as many of these are used as baits to hook you on and get scammed.
    6. Ensure the passwords you use online are strong and securely stored. Using phone numbers or birthdays as passwords can expose you to hacking.
    7. Always check the email address you receive information from to see if they are from the right domain. In addition, be on the lookout for spelling mistakes or bad grammar as most scams tend to have inconsistencies and errors.

    Always Report A Scam

    If you spot a scam don’t hesitate to report the matter to the relevant authorities. In the UK, you can report a scam online or call Action Fraud on 0300 123 2040. Other reporting avenues you can use are your bank or payment provider. Your report may go a long way in helping other potential targets avoid being scammed.

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    The post The Top Financial Scams of 2021 and How to Avoid Them appeared first on Solution Loans.


    Why Provident is closing its doorstep loan business. What’s next?

    Provident Financial Plc is the largest subprime lender in the UK founded in Bradford in 1880. Over the last 140 years, the company has grown and tailored its core lending business to better serve the needs of its customers who The post Why Provident is closing its doorstep loan business. What’s next? appeared first on Solution...

    Provident Financial Plc is the largest subprime lender in the UK founded in Bradford in 1880. Over the last 140 years, the company has grown and tailored its core lending business to better serve the needs of its customers who were underserved by mainstream banks and credit companies. Of its three divisions, its Consumer Credit Division (CCD) that operates its home credit (Provident loans) and online (Satsuma Loans) is perhaps its most important. So, it is all the more surprising that Provident has been struggling with home credit in the last few years.

    Provident’s Doorstep Lending Business

    Provident’s doorstep loans business offers small value loans to people who are often excluded from mainstream credit solutions, whose incomes are often below the UK’s average and more likely than not to rent their home. Perhaps most importantly the customers do not have the luxury of savings to buffer them. Hence the access to small loans that they can repay on a weekly basis has been important. The average loan size is around £300. At any point in time Provident is lending to around 300,000 customers.

    As of December 2020, the UK home credit market was worth £592m and Provident controlled 39% of that. Over the same period, the high-cost short-term market was valued at £184m and Satsuma HCSTC controlled 8% of this market. A portion of the UK market is met by local and regional providers. Provident is one of three national providers, the others being Morses Club and Loans at Home.

    Provident Is Closing Its Consumer Credit Division

    On 10 May 2021, the Provident announced it was stopping lending to both new and existing customers as it contemplated placing the division into a managed run-off or disposal. The only exception would be for customers who had already applied for loans and had signed the loan agreements. But why such a radical announcement? What’s gone wrong?

    Provident website August 2021

    Some of the division’s weakness stems from mistakes it made in 2017. Back then it chose to move from a self-employed workforce of agents to a new employed workforce supported by new technology. Many of the agents chose to leave the industry rather than become employed. Others were picked off by their competitors. And the new support software created chaos for the collections process. The two problems combined such that the value of the business was significantly reduced. And the problems persisted over time.

    On the back of this business weakness, Provident’s competitor Non-Standard Finance (NSF), owners of “Loans at Home”, attempted an unwelcome takeover of them in 2019. If nothing else this was a distraction that Provident could have done without. Provident managed to deter NSF but more damage was done.

    Much more recently Provident has highlighted two other factors that have triggered its decision to exit the doorstep lending business:

    Customer Complaints

    Provident customers have increasingly been launching mis-selling complaints through Claims Management Companies. According to the claims, customers faulted the way Provident conducted its affordability and sustainability checks when handing out loans. The Financial Conduct Authority (FCA) jumped in to investigate the complaints specifically for loans issued between February 2020 to February 2021. In the first half of 2020, compensations for customer complaints cost PFG £25million a huge jump from £2.5million in the same period the previous year.

    Financial Struggles

    Even before Covid-19, the Consumer Credit Division had begun showing signs of financial struggle. When the pandemic hit, the operations worsened resulting in a £74.9m adjusted loss before tax loss for the division in 2020 compared to a £20.8m loss recorded in 2019.

    What Happening Now?

    To help address the impact of the rising consumer claims on its Consumer Credit Division, PFG on 15 March 2021 launched a Scheme of Arrangement, a legal method to help a company to restructure and aid it from financial distress.

    Under the Scheme of Arrangement, Provident has sought to address claims arising from historic lending. These are claims relating to loans that were made between 6 April 2007 and 17 December 2020. Provident set aside £50m for the Scheme claims and a further £15m to offset the Scheme related costs, bringing the total commitment to £65m.

    For the Scheme to be operational, it needed to be approved by the customers with redress claims and sanctioned by the High Court. The affected creditors are approximately 4.2 million.

    The lender had warned that failure to have the Scheme approved, the Consumer Credit Division would have to be liquidated or put under administration. This would also mean that the customers with redress claims may end up not receiving any payment.

    According to the Provident Financial Group board, the Scheme of Arrangement is the best bet and would ensure the interests of all parties – Consumer Credit Division, the Provident Financial Group, and stakeholders – are secured. Key dates have included:

    • 22 April 2021 was the first court hearing where the Court ruled that CCD organise a meeting with the creditors of the Scheme to deliberate on the merits of the Scheme.
    • 17 May 2021, the voting portal was opened to allow past and present CCD customers and the Financial Ombudsman Service to vote on the Scheme.
    • 19 July 2021, the Scheme Meeting as provided for by the Court was held virtually and attended by over 428,000 creditors.  Of these, 420,000 (98.1%) voted in favour of the Scheme.
    • 30 July 2021, the High Court in its sanction hearing approved the Scheme of Arrangement by Order of 4 August 2021. This means that PFG will go ahead with the implementation of the Scheme and opening of the portal.

    The FCA had its reservations about the use of a Scheme of Arrangement. They did not want consumers to suffer loss (i.e. get significantly less compensation than they are owed as per their redress claims), but when this was compared to the total insolvency of Provident Personal Credit Limited, the regulator decided not to move to court to block the Scheme of Arrangement.

    What’s Next?

    The Scheme became binding on 5 August 2021. Following the opening of the portal, customers will have until the end of February 2022 to submit their claims. If they fail to do so they will lose their right to compensation.

    Provident expects that all compensation claims will have been assessed, settlements made, and the Scheme closed by the latter part of 2022.

    Related Stories

    The post Why Provident is closing its doorstep loan business. What’s next? appeared first on Solution Loans.


    How consumer borrowing has changed in 2021

    To limit the spread of covid-19 the UK government announced the first national lockdown on 23 March 2020. People had to stay at home unless they were essential service providers. In a period when there were no vaccines, this was The post How consumer borrowing has changed in 2021 appeared first on Solution...

    To limit the spread of covid-19 the UK government announced the first national lockdown on 23 March 2020. People had to stay at home unless they were essential service providers. In a period when there were no vaccines, this was the only option available. The effect of these measures was to severely limit people’s ability to spend. Only physical shopping for essentials was permitted and while online sales increased significantly the overall amount spent fell. Consequently, credit card spending declined markedly reaching a 27-year low in February 2021 according to a report by the Bank of England. Lenders also pulled in their horns not wishing to expose themselves to undue risk should unemployment start to increase. Since March 2020, the consumer credit trend has been characterised by more repayments than borrowings.

    Shopping in the time of covid-19

    Rebound in Spending and Demand for Consumer Credit

    Since the 17 May 2021 relaxation of restrictions, consumers have gone out and spent. During the pandemic, many people had strengthened their balance sheets, piling significant cash in savings accounts and other deposit accounts. It is worth pointing out though that this is by no means true of all sectors of society. Some have become worse off following lower incomes and some unemployment (if furlough was not an option).

    Following a successful vaccine deployment programme and a slowdown in infection rates and hospitalisations, people have been allowed to travel (within strict guidelines) and enjoy outdoor entertainment. Thanks to the thrill of the regained freedom, consumer spending on things like drinking, dining, leisure, and travel, has spiked. Economists call it ‘revenge spending’ and it gives a hint that the worst of the pandemic could be over.

    For instance, looking at travel, some popular destinations have moved lists from amber to green meaning they are safe to travel to and fro for UK residents. In addition, under-18s and fully vaccinated UK adults will no longer be required to self-isolate when coming from amber-list countries. This could as well be the momentum the tourism industry needs on its path to becoming a £257 billion industry by 2025.

    Aside from the spending trends, looking at the specific forms of credit that UK consumers are applying for can give an idea of their perception of the Covid pandemic. Here are the numbers as reported by the Bank of England’s Money and Credit statistical release for May 2021.

    In what appears to be a trend reversal in the consumer credit market, the net borrowing on credit facilities like overdrafts, personal loans, and credit cards was reported at £280 million in May compared to a net repayment of £228 million in April.

    Personal Loans

    New personal loan borrowers are enjoying some of the lowest rates in the UK.  Compared to January 2020 where loans to individuals were priced at 7.03%, May 2021 showed a significant decline in interest rates to 5.61%.

    The combination of affordable credit, easing of lockdown restrictions and pent-up demand, is pushing up the needle on personal loan borrowing. As they say, old habits die hard, and we are likely witnessing a return to pre-pandemic borrowing levels.

    According to the British Retail Consortium, May retails sales in the UK surged by 10% in comparison with the same month two years ago. This was the highest percentage since the pandemic began. In collaboration with KPMG, the British Retail Consortium further showed that sales figures were up by 13.1% in June compared with the same month in 2019.

    Car Finance

    Aside from personal loans, car finance was the other key driver behind the increased uptake in consumer credit. The Society of Motor Manufacturers and Traders (SMMT) recorded a total of 186,128 new car registrations in June 2021 compared to 145,377 in June 2020, a 28% annual increase. Private car registrations were at 88,715, a 21.8% increase from the same month last year.

    According to the Finance & Leasing Association (FLA), the consumer new car finance market grew by 514% in May 2021 compared with May 2020. The consumer used car finance market also reported a surge in May sales of 270% when compared with the same month in 2020.

    Consumers are increasingly becoming optimistic as the UK coronavirus restrictions are eased and the economy is showing signs of recovery.

    Mortgages

    May 2021 saw net mortgage borrowing bounce back to £6.6 billion. Thanks to the Stamp Duty Land Tax (SDLT) holiday that came into effect on 8 July 2020, buyers of residential properties enjoyed a nil rate band of up to £500,000 of their purchase prices.

    The tax holiday was initially meant to end on 31 March 2021, but it was extended to 30 June 2021.  Beginning 1 July 2021 to 30 September 2021, the nil band rate will reduce to £250,000 and on 1 October 2021, it will go back to the standard £125,000. The timing of the end of the SDLT holiday certainly had a huge impact on mortgage applications and approvals as many homebuyers wanted to cash in on the savings.

    The surge in net mortgage borrowing in May was preceded by a dip in April of £3.0 billion after March recorded £11.4 billion. The March net borrowings, the strongest since April 1993 when records officially began, were largely driven by the frenzied rush to beat the expected ending of the SDLT holiday. Mortgage approvals stood at 87,500 in May, up 0.69% compared to April’s 86,900.

    Conclusion

    Following the lifting of most legal restrictions on social contact on 19 July, Britons can now meet and attend events without any limits. Over 68% of UK adults have so far received the full dose of the coronavirus jab and scientific modelling is predicting fewer cases of hospitalisations and serious illnesses than before.

    Consumer spending is likely to go up and so is the appetite for consumer credit whether it is personal loans, mortgage, or car dealership finance. The months to come especially from the beginning of August will be interesting to watch as consumers resume their lifestyles.

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    The post How consumer borrowing has changed in 2021 appeared first on Solution Loans.


    Key differences between a Line of Credit, Bank Overdraft, Credit Card and Payday Loan

    Statistics from the Bank of England revealed that in 2019, consumers took up £13.2bn of additional credit debt. And according to the Office of National Statistics, close to 9 million people increased their borrowings in 2020 to help them cope The post Key differences between a Line of Credit, Bank Overdraft, Credit Card and Payday Loan appeared first on Solution...

    Statistics from the Bank of England revealed that in 2019, consumers took up £13.2bn of additional credit debt. And according to the Office of National Statistics, close to 9 million people increased their borrowings in 2020 to help them cope with the covid pandemic. But there are a wide variety of ways people accessed this credit.

    Data from the Financial Conduct Authority (FCA) shows that about 26 million Brits use overdraft facilities every year both arranged and unarranged. In a separate report, the FCA showed that on average, 36.9% of payday loan borrowers are people aged 25 and 34 years. The second highest age group of payday loan borrowers are people aged between 35 and 44 years, comprising 22.3% of the borrowers.

    How Different Are the Credit Facilities in the Market?

    Looking at the numbers, it is clear the appetite for credit in the UK, whether consumer credit or mortgage lending, is continuing to grow. With new financial products being rolled out and the traditional ones being tweaked to cater to the different consumer segments, it helps to know how these products are structured and their suitability to your circumstances. This article looks at lines of credit, bank overdrafts, credit card debt and payday loans.
    Drafty - a line of credit

    Lines of Credit

    A line of credit refers to a form of debt where a lender makes cash available as and when the borrower needs it. It is pre-approved credit that you draw upon as required. There is a maximum amount you can draw, and interest begins accumulating immediately you make your draw.

    The main advantage of this form of credit is that it gives you flexibility on the amount to borrow and when to borrow. Lines of credit can either be secured or unsecured. Secured lines of credit use collateral such as a savings account or a property to guarantee repayment of the facility. Unsecured lines of credit on the other hand are mostly used by individuals and don’t require any collateral.

    Lines of credit are priced based on Annual Percentage Rate (APR) which gives you the true cost of credit. If you have a good or excellent credit score when applying for a line of credit, you may qualify for a lower APR.

    As an example, if you borrow from Drafty £1,200 for a year and your APR is 89.7%, you’ll repay the amount advanced plus an interest amount of £401.40 bringing the total to £1,601.40.

    Bank Overdraft

    When you draw more than your bank account balance, you’ll end up with a bank overdraft. As a credit facility, the bank overdraft can be arranged where you notify the bank in advance before ‘going overdrawn’.

    The bank will then authorise the overdraft facility and charge interest on the amount of the overdraft subject to a certain limit and period. In other cases, the period limit may be lifted, and interest calculated each day based on the days the overdraft is outstanding and charged to your account monthly. On average, expect to be charged up to 75p a day on a facility of £500.

    If your account becomes overdrawn without you first having agreed on this with the bank, then you have an unarranged overdraft. The danger with an ‘unauthorised’ overdraft is that it will impact your credit rating and you will be charged a penal rate of interest and potentially additional fees.

    If you get an arranged overdraft of £1,200 for 30 days at 35.0% APR Representative (variable), you’ll pay about £29.87 in interest.

    Bank overdrafts require that you have a bank account before applying. The bank will ask you to declare your net income each month, any other credit arrangements you have, and your monthly expenses.

    When borrowing for short-term needs (up to a month) and amounts not exceeding £5,000, bank overdrafts can be an option. That being said, check for overdraft facility fee as it can be quite substantial.

    Credit Card

    Credit card debt is one of the most common forms of consumer credit in the UK. Whether you want to bridge your cash flow or help pay for essentials, credit card debt is among the preferred forms of financing.

    To benefit from credit cards, you need to know the terms and conditions to enable you to choose the right credit card for your needs. Here are the different types of credit cards to expect.

    • Balance transfer credit cards -these cards help in consolidating what you owe from other cards so you can transfer the balance onto a new card.
    • Purchase offer credit cards -these types of cards don’t charge interest and are best used for shopping.
    • Reward credit cards – if you want to pocket cashback, on your everyday spending reward credit cards will give you exactly that.
    • Credit building credit cards – whether you are building your credit score from scratch or improving it, credit building cards can help.

    The variety of features in credit cards is what makes them among the preferred form of consumer credit. Having said that, balance transfer cards only make economic sense if you take advantage of the 0% introductory interest for the stated period or transfer a given minimum within the duration given such as 60 days after opening your account.

    There are also transfer fees to factor in ranging anywhere from as low as 0.9% to about 3%. The representative APR for most credit cards is around 21.9% and if you pay the balance within 26 months, you could be charged interest of about £50- £60.

    Payday Loans

    Payday loans are short-term credit facilities that can get you approved for amounts ranging from £100 to £1000. The FCA has been very strict on payday loans following claims of high APRs that can make them unaffordable. However, most lenders are working to ensure the borrower concerns raised are addressed.

    Payday loans are best for small amounts (from as low as £300 up to £1,500) and ought to be repaid within one to two months.

    The advantage with these loans is that they are approved almost instantly and transfers are made virtually instantly giving you quick access to cash. For instance, if you borrow £300 for a period of 3 months, the interest that you’ll pay is £154.37, bringing the total amount payable to £454.37. The APR can be as high as 1301%.

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    The post Key differences between a Line of Credit, Bank Overdraft, Credit Card and Payday Loan appeared first on Solution Loans.


    Is this the end for guarantor loans?

    The COVID-19 pandemic has dealt a severe blow to the UK economy with unemployment numbers reported at 4.8% for the period between January 2021 – March 2021. With such a depressed economy, the number of borrowers especially those with bad The post Is this the end for guarantor loans? appeared first on Solution...

    The COVID-19 pandemic has dealt a severe blow to the UK economy with unemployment numbers reported at 4.8% for the period between January 2021 – March 2021. With such a depressed economy, the number of borrowers especially those with bad credit is expected to spike.

    A September 2020 national poll by StepChange Debt Charity revealed that close to 2.5m people were staring at a financial crisis arising from the coronavirus pandemic. The poll also found out that corona virus-related household debt in the UK reached levels of £10.2 billion, rising by a whopping 66% from May 2020 to September 2020.

    Over the last decade, guarantor loans have been one of the most popular credit options in the UK. This is because they open the door to unsecured borrowing for people who would have otherwise not been approved due to poor credit history. Provided you can get someone else with a strong credit history to guarantee you, the chances of getting approved are much higher.

    UK guarantor lenders 2021

    Why the Decline in Guarantor Lenders?

    So, in 2021, it is very strange to see that there is a marked decline both in guarantor lenders and guarantor loan products. The decline has been so noticeable that there are suggestions we are seeing the beginning of the end for this category of loans.

    Amigo, who has been the key driver of growth in the guarantor market and accounts for about 90% of the guarantor loan market, is now on the verge of insolvency! A company that was listed in July 2018 and valued at £1.3bn is now worth a paltry £40m! In other words, it has lost 97% of its value.

    Non-Standard Finance (NSF), the second-largest player in the market through the TrustTwo and George Banco brands, has just announced that it will place its guarantor loan business into a “managed run-off” with final closure timed for 2025. It will not issue new loans but simply manage the existing loan book.

    During the height of the pandemic Bamboo quietly stopped new guarantor loan lending, and other brands such as UK Credit and TFS Loans attempted to redefine their offerings to address concerns about guarantor loans.

    There are many reasons why these lenders are contracting. Perhaps the most important is the FCA’s attitude to the sector and its gradual reassessment of the regulatory environment. In addition, there is a surging number of claims brought by claims management companies (CMCs). It was such claims that brought many payday loan lenders to their knees a few years ago.

    The Complaints About Guarantor Loans

    There are several types of complaints that borrowers have brought against guarantor loan lenders. Here are some of the most common ones.

    • Affordability: Some borrowers have claimed that lenders should have known better about their inability to repay loans. Instead of approving their applications, they should have declined them.
    • Unfair treatment: Even after a change in borrowers’ financial circumstances, there are claims that some lenders are still pursuing the loans advanced with not much wiggle room for renegotiation or loan restructuring.
    • Problems with credit files: As a result of events around guarantor loans, borrowers have begun taking hits on their credit files. Consequently, this has been jeopardising their ability to access other financial products.
    • Guarantor mistreatment: There are claims that guarantors are being prematurely contacted with others being threatened with legal action should they fail to fulfil their obligations.
    • No Room for Bankruptcy: Some guarantor loan lenders have been accused of baring borrowers from including their loan products in bankruptcy or Individual Voluntary Arrangements. This has made loan management difficult.

    Apart from the claims brought forward by borrowers, some have been fronted by guarantors. For instance, some guarantors have raised concerns about their ability to afford payments with others claiming that they are being pestered for payment.

    Industry regulators such as the Financial Conduct Authority are also poking holes into the governance and creditworthiness assessment models of these lenders. There are chances of non-compliance with regulatory requirements.

    What’s The Way Forward for Borrowers

    With all that is happening around the guarantor loan market, you could be wondering what the best alternative is for borrowers with credit problems. There are other unsecured loan products available and the one that suits you may depend on the amount you want to borrow and for how long. Find out about instalment loans and bad credit personal loans.

    Conclusion

    The UK guarantor loan market has had its successes but also some epic failures some of which are gradually coming to light. Complaints lodged by borrowers and guarantors through CMCs have prompted regulatory authorities to step in and assess the governance structures of lenders in this market.

    Following these developments, some lenders are shutting down their guarantor loan divisions with others facing potential bankruptcy. While this may not necessarily be the end of guarantor loans, it could change the structure of the market for good.

    Despite the rather gloomy picture, borrowers still have alternatives that they can consider in products. Borrowers only need to compare the different loan quotes and the terms of lending.

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    The post Is this the end for guarantor loans? appeared first on Solution Loans.


    How to Choose the Best Car Finance

    According to the RAC Foundation, car ownership has risen considerably over the last 50 years – nowadays 76% of households have access to a car or van compared to 52% in 1971. And the number of households with two vehicles The post How to Choose the Best Car Finance appeared first on Solution...

    According to the RAC Foundation, car ownership has risen considerably over the last 50 years – nowadays 76% of households have access to a car or van compared to 52% in 1971. And the number of households with two vehicles has also risen dramatically. Yet the fact remains that buying and running a vehicle is costly.

    To get a new SUV in the UK, you must be willing to spend a minimum of £23,000. A new medium-sized car will cost you anything from £22,000. Many households will choose to buy a used car to help in this regard. And innovative car finance solutions also help to spread the cost. Paying £20,000+ upfront is an uphill task or impossible for most people hence making car finance an appealing option.

    Car finance remains the preserve of private individuals – companies are relatively small users of this technique. In the 12 months to February 2020 1.5 million used cars were bought on finance, and 900,000 new cars. So, with the use of car finance so prevalent how do you decide which type to use? Which would meet your needs best?

    New Car in Showroom

    Car Financing Options

    Whether this is your first time out shopping for a car finance deal or not, knowing how to compare the different finance choices is crucial in helping you get an affordable well-structured finance option. Here is what you should consider.

    Personal Contract Purchase (PCP)

    This car finance model allows you to get behind the wheel by paying an upfront deposit usually about 10% of the price of the vehicle. Some car manufacturers have finance arms that offer deposit contributions to help you pay off the initial amount especially when buying a new car.

    The term of this financing model usually ranges between 24 and 36 months. During this period, you’ll be required to pay pre-agreed monthly instalments. In the end, if you wish to own the vehicle, you’ll be required to pay a balloon payment also referred to as Guaranteed Future Value (GFV). Alternatively, you can do a part exchange for a new car and start another PCP contract or hand over the car to the finance company.

    As part of the contract, you agree with the car finance company on the mileage limit per year. Any extra mile that you drive past the annual limit will see you getting charged.

    Over 8 in 10 new car sales in the UK are financed through PCP agreements. This is according to the Society of Motor Manufacturers and Traders (SMMT).

    Personal Contract Hire (PCH)

    This financing model works the same way as a long-term rental contract. It is a form of leasing available to private car owners where you pay a deposit and monthly fixed instalments thereafter. Depending on the finance company, the deposit can be equivalent to 8 – 10 monthly instalments.

    At the end of the contract, you return the vehicle to the finance company. There is no option open to pay for and own the vehicle.

    About 11% of new car financing deals in the UK are done through PCH. To get the most out of this arrangement, you should sign up for longer agreements as this will ensure you pay lower instalments. Depending on the company, you may be given the option of adding the cost of maintenance to your instalments so that you only make a single monthly payment instead of worrying about large occasional car repair bills.

    One thing to note when signing up for a PCH deal is that you will be charged for mileage exceeding the pre-agreed annual maximum. Therefore, you must not understate the mileage component when drawing the contract lest you find yourself paying 5p to 15p for every extra mile driven.

    Hire Purchase (HP)

    Much like PCP, a hire purchase agreement allows you to pay a deposit and then fixed monthly instalments for the rest of the contract period. In the end, you have the Option to Purchase the vehicle so that it becomes yours. If you make a larger deposit, the monthly repayments will be much smaller.

    Each monthly instalment has an element of interest to it. This means the longer the hire purchase contract, the higher the cumulative interest you’ll pay. If you shop around the car finance market, especially through the help of a licensed credit broker, you may get lenders who have special promotions on deposit. They may either give you 0% APR deposit deals or help you pay part of the deposit about £500 to £2,000.

    Until you make the last payment to own the vehicle, the HP agreement recognises you as the registered keeper of the vehicle while the finance company is the legal owner. It is your responsibility to ensure the vehicle is serviced, properly insured, and maintained.

    Conditional Sale (CS)

    Similar to a personal loan, a conditional sale is an agreement that allows you to buy both used and new cars by paying a deposit and equal monthly instalments for an agreed period. You can either pay the deposit in the form of cash or bring your existing car for a trade-in.

    Depending on your budget and what works for you, you agree with the finance company on what you can pay per month. You get to enjoy the vehicle from the day it is delivered and once you pay the final instalment, you can take legal ownership.

    Most CS agreements usually take about 12 to 60 months. The interest rate remains fixed, and the deposit is usually around 10% of the price of the car.

    Which Type of Car Finance Is Right for You?

    Having looked at the different ways of financing your next car purchase, you could be at a point where you are asking, which type of car finance is right for me? Well, here are some important points to consider:

    Do You Want to Own the Car?

    If yes, then hire purchase, conditional sale, or personal contract purchase are options you should consider. Personal contract hire is out of the picture.

    Do You Want the Installments to Include Car Servicing Costs?

    A personal contract hire gives you that option so that you don’t have to worry about paying separate amounts for car servicing and instalment.

    Are You Unsure of The Miles You Are Likely to Do in A Year?

    If you don’t want or are not sure how many miles you’ll log per year, hire purchase financing and conditional sale are the best options.  They have no pre-agreed mileage limits where you are charged if you go beyond.

    Are You Looking at Low Monthly Instalments?

    Of the above financing methods, Personal Contract Purchase often comes with the lowest instalments. The reason is that your instalments are only for the depreciation value of the car and not its total value.

    What To Do If You Have a Poor Credit Score

    With a poor credit score (generally below 500) you could be classified as a sub-prime borrower. This means you may either be denied car finance or offered a deal with a higher interest rate. However, there is a way out! Before you opt for financing, run your credit report to find your scores and the entries made on the credit report.

    Check for errors, don’t apply for multiple credit lines, keep your old credit open, pay bills on time and close any bad joint accounts. This will help you boost your credit score. If you are not yet registered to vote, do so as this can also up your score. Lastly, when shopping for car finance, use a service that can help you sample a wide range of car finance companies that fit your profile.

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    The post How to Choose the Best Car Finance appeared first on Solution Loans.


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