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 consumer credit market has seen its fair share of disruptions arising from innovative ideas targeting consumer experience and convenience. For instance, over the last decade, the UK has seen the rise to prominence of a new consumer credit business The post What are the Pros and Cons of Buy Now, Pay Later (BNPL) Finance? appeared first on Solution...
The consumer credit market has seen its fair share of disruptions arising from innovative ideas targeting consumer experience and convenience. For instance, over the last decade, the UK has seen the rise to prominence of a new consumer credit business model known as ‘Buy Now Pay Later’ (BNPL).
Buy now pay later providers such as Klarna, Laybuy, ClearPay, and Paypal Credit strike partnership deals with retailers to give consumers access to upfront credit to help them complete their purchases. Repayment of the credit advanced can either be staggered in fixed instalments over an agreed-upon duration or settled in a one-off payment at a later date.
A 2020 report by Worldpay, puts the annual rate of growth of buy now pay later in the UK at 39%. Another report by Capital Economics, a leading independent consultancy revealed that one-fifth of the adult population in the UK (10 million people) used ‘buy now pay later’ as an option to help them complete their purchases in 2020. Further, the report noted that nearly 4% of all 2020 retail sales in the UK were made via the buy now pay later payment model.
Before delving into the pros and cons of the BNPL model, there’s a need to understand how this payment method works. Here is a quick stepwise summary to help you wrap your head around it.
Klarna’s “pay in 3” offer means the cost of your purchase is divided into three payments that are made every 30 days – the first payment at the time of purchase and the final payment 60 days later. There is no interest or fees to pay. So it’s a good alternative to a short term loan or a credit card.
The BNPL option confers significant benefits both to consumers and merchants. Here is a quick overview of the benefits consumers should expect when using it.
Well, almost everything that exists has its pros and cons and this applies to buy now pay later credit as well. Despite the many pros listed above, buy now pay later has a number of disadvantages that you must watch out for.
In the United Kingdom, the Financial Conduct Authority (FCA) is the body mandated with the regulation of financial firms and services. However, BNPL providers are currently not regulated by FCA.
Having said that, there is a push by the regulatory body to have such credit offerings covered by its rules. The argument is that billions of pounds are lent to consumers through unregulated transactions thereby putting them at risk of plunging into financial difficulty. The FCA believes that it is easy to build up unseen debts of £1000 or more.
Under the proposed regulatory framework, BNPL providers will be required to conduct hard credit checks on consumers in addition to affordability tests before extending credit. All this is aimed at cushioning financially vulnerable consumers against insecure and unsustainable debt offerings.
The buy now, pay later industry has witnessed tremendously rapid growth with firms such as ClearPay, Klarna, Affirm and Laybuy taking the centre stage. The credit extended with this type of product now stands at £2.7 billion in the UK alone. The advantages of instant credit, deferred payment arrangements, and low to zero cost credit have made BNPL very appealing. With that being said, consumers must be careful not to take debt they cannot afford. In the meantime, the FCA is looking to put in place a raft of measures to ensure that buy now pay later activities are brought under its wings and that consumers are sufficiently protected.
The post What are the Pros and Cons of Buy Now, Pay Later (BNPL) Finance? appeared first on Solution Loans.
As energy costs have risen in the UK we are increasingly being advised to continually switch energy suppliers to avoid the worst of the price rises. However, since November 2016, nearly 20 small suppliers have gone bust or left the The post What happens if my energy supplier goes bust? appeared first on Solution...
As energy costs have risen in the UK we are increasingly being advised to continually switch energy suppliers to avoid the worst of the price rises. However, since November 2016, nearly 20 small suppliers have gone bust or left the market and this has made many consumers nervous. So, should you continue to switch – especially away from the big names in the industry – and what happens if the energy supplier you’re with goes out of business?
The energy supply market is one that has long been dominated by the Big Six (British Gas, EDF Energy, E.ON, Npower, Scottish Power, and SSE). However, over the last decade, we have begun to see many more competitors entering the market. These new businesses are often innovative and small, seeking to find new ways to deliver energy, frequently in a way that is cheaper or more efficient for consumers. Eversmart, for example, allowed customers to pay for a year’s gas and electricity usage up-front in order to secure the cheapest rates. However, despite this innovative thinking, Eversmart went under and it’s not the only new energy supplier to have done so in recent years.
Each situation is different and there could be any number of reasons why an energy supplier ends up being forced out of the market. Experts highlight the uncertainty of Brexit as one of the major issues, as well as high wholesale prices, the Winter Price Cap and a number of other unexpected costs. Some suppliers may also simply be disappointing customers, many of whom have much higher expectations in terms of energy delivery and value for money than used to be the case.
It’s not the end of the world for a customer if an energy supplier goes out of business. Ofgem is the energy industry regulator and will step in where a supplier has gone out of business. It will protect any existing balance that you have on your account with the supplier and also ensure that your home continues to have an energy supply. Ofgem will then find another supplier for the energy needs of any customers who have been affected. It does this not by simply selecting a supplier but giving them the opportunity to bid for customers so that you get the best possible deal on your new energy contract.
Do I have to stay with the new energy supplier? No, you’re not locked into a deal that you didn’t personally choose and you can leave at any time with no exit fees to pay.
Can I switch to a supplier of my choice straight away? Ofgem recommends waiting until the new supplier has been appointed and gets in contact with you – it will be much easier to then switch to the supplier of your choice after that point.
Do I have to take action to switch to the new supplier? Ofgem will handle the transition to the new supplier for you and you don’t need to do anything.
Am I likely to experience a disruption in terms of my energy supply? No, everything should remain the same in terms of customer experience.
What happens if I have a prepayment meter? You can keep using this in the same way as you were before until a new payment device arrives.
What tariff will I get with the new supplier? In this situation, customers are usually moved onto the ‘deemed tariff,’ which is designed to match the rate you were on previously. However, if your bills do go up you can leave and find a cheaper supplier.
Ceased trading: October 2019
Number of customers: 134,000
When Toto Energy went under in late 2019 Ofgem released a statement reassuring the supplier’s customers that there was a safety net. It said credit balances were protected by the regulator and prepayment meters could be topped up as normal. It provided two key pieces of advice to customers: 1) take a meter reading as soon as possible so as to provide this to the new supplier and 2) wait until the supplier chosen by Ofgem makes contact before attempting to switch to a new supplier.
Although smaller energy suppliers have a higher chance of going bust their customers are completely protected by Ofgem. These new businesses represent an important tool for continuing to put pressure on the Big Six energy businesses to be more competitive and innovative. Customers who support them are helping to make the energy market more diverse and less expensive for everyone.
Are you paying too much for your insurance? Most of us consider insurance essential, whether it’s for your home, car, pet or holiday. However, it’s often difficult to know whether you’re getting the best deal when it comes to policies. The post How to avoid being ripped off by insurers appeared first on Solution...
Are you paying too much for your insurance? Most of us consider insurance essential, whether it’s for your home, car, pet or holiday. However, it’s often difficult to know whether you’re getting the best deal when it comes to policies. Now, a new assessment from the Financial Conduct Authority (FCA) suggests that many people are being overcharged for insurance and that this is disproportionately affecting those on low incomes. So how can you avoid the big insurance premium rip-off?
The FCA found that six million motor and home insurance policyholders are being overcharged by insurance companies by around £200 a year – each. According to the regulator, this is the result of the “loyalty penalty,” whereby the customers that remain loyal to insurance companies are not being offered the best deals. However, the regulator’s negative assessment of the insurance industry goes further than highlighting how insurance companies aren’t giving loyal customers the best deals. It also found that the sector is actually targeting those they consider to be the most loyal with the biggest price increases because they are the least likely to switch. There are also many ways in which the insurance industry will try to put up obstacles to customers leaving for another, cheaper provider, for example by using automatic policy renewal practices. The spotlight being shone on the industry by the FCA comes in the wake of a significant rise in customer complaints about the insurance sector – complaints about renewal hikes, for example, increased by two thirds in just one year.
Recent examples of those who have been hit by the premium rip-offs have been published in the mainstream media. They include:
Elderly and low-income groups were identified by the FCA as the most likely to be hit by insurance price rises. Two years ago the FCA introduced the practice of requiring insurers to publish the premium from the previous year when sending out a renewal letter to try and stop this happening. However, there is still more that could be done, for example requiring providers to automatically switch a consumer to the cheapest deal that is most appropriate for them.
Insurance may be essential but that doesn’t mean that you have to be caught out by insurance premium rip-offs.
For most of us, the concept of debt is as a sum that is borrowed and then repaid as soon as possible. However, while that might be the case for regular finance, student loans are rather different. As a result The post Should I repay my student loan early? appeared first on Solution...
For most of us, the concept of debt is as a sum that is borrowed and then repaid as soon as possible. However, while that might be the case for regular finance, student loans are rather different. As a result of the very specific terms and conditions that come with student loans, for some people, it may actually make more financial sense not to repay student loans. So, how does it work?
This is the first essential question. Depending on when you went to university you will have a different type of loan and alternative rates of interest and repayment might apply.
First of all, it’s worth noting that most student loan repayments will be automatically deducted from your salary once you go over the specific threshold for your type of loan. So, you will not have any choice about making the basic repayments. What many students are currently struggling with is the question of whether they should overpay on a loan – or pay it off completely if they have the cash. The short answer to that is unless you are earning more than £50,000 a year, you’re otherwise debt-free and you’re not likely to want to get on the housing ladder any time soon there may not be any financial benefit to you in committing to total repayment. Here’s why:
Rather than trying to clear such low-interest debt that is going to disappear at some point anyway, it makes sense for many people to invest extra cash elsewhere. For example, you might have credit cards or other debts from your student days that are smaller but have higher interest rates. So clearing other debt should be more of a priority than overpaying on student loans. Putting money aside into savings can also be more constructive than sending it to your student loans lender. If you’re lucky you might find a savings interest rate that is higher than what you’re paying for student loans. But you can also create some security by putting that additional money aside for a rainy day.
For many people, working to overpay or fully repay student loans as soon as possible just to be debt-free just isn’t financially smart. Rather than worrying about having that debt hanging over you, it may well make sense to use the extra money in a different way to help secure your financial future.
The rollout of smart meters across the UK was supposed to make life easier for consumers and introduce a new level of transparency to energy use. However, the original deadline set by the government to have smart meters installed (or The post Why are smart meters delayed? Is this a problem? appeared first on Solution...
The rollout of smart meters across the UK was supposed to make life easier for consumers and introduce a new level of transparency to energy use. However, the original deadline set by the government to have smart meters installed (or at least offered) to every home in the UK by 2020 has now been delayed. Instead, a new target of 2024 has been set. So, what does this mean for UK consumers and why has the rollout fallen so far behind schedule?
At the time the deadline was set energy providers suggested that it was not realistic. Most felt that that the technology required was just not ready. Plus, many providers said that they simply wouldn’t have the time or resources to get smart meters into the requisite number of homes by 2020. The new deadline means that they now have until the end of 2024 to install smart meters in at least 85% of customers’ homes.
Partly due to problems surrounding the technology itself, there have been a number of issues that have arisen with those smart meters that have already been installed. For example, many consumers found that the smart meters they were given only worked if they stayed with the same supplier and were useless if they switched. Some smart meters only work sporadically and others seem to be affected by changing environments, such as weather conditions.
As of June 2019, around 15 million smart and advanced meters were up and running in the UK. The overall goal for installation is 53 million smart meters in both homes and small businesses – now by 2024.
A smart meter is basically the same as a traditional electric or gas meter used to monitor energy consumption. The big difference is that the information it collects is sent straight to the energy supplier. Consumers are also able to monitor their own energy usage via the data that appears on the smart meter screen.
It will give energy companies a chance to fix the technical problems that have plagued smart meters and to find a model that works for everyone. It could also help to avoid a swathe of customer service complaints. In order to meet the rollout deadline, many energy companies have been repeatedly and aggressively targeting consumers with smart meter communications. This should ease off now that the deadline has been moved.
Although energy suppliers are under an obligation to ensure that every home is offered a smart meter, there is no requirement for consumers to accept one. There is no upfront cost to consumers in having a smart meter but no obligation either. Consumers can choose to have a smart meter when offered, to request one from a supplier if not yet offered, or simply to opt to have one installed at a later date. That applies to homeowners as well as to tenants who pay their energy bills directly to a supplier, as opposed to via a landlord.
Although this is arguably the worst time for a delay to the smart meter rollout – given that Brexit is on the horizon, winter is coming and many individuals are struggling financially, it may turn out to have had advantages. Smart meters that work and actually provide promised benefits for consumers – as opposed to making life more difficult – will be far more beneficial even if they arrive a little late.
Illegal money lenders – or, loan sharks – have a deservedly negative reputation. They frequently target those already struggling with financial problems and make it even more difficult to get back to a positive place. Loan sharks are unregulated and The post The Success of the Illegal Money Lending Team appeared first on Solution...
Illegal money lenders – or, loan sharks – have a deservedly negative reputation. They frequently target those already struggling with financial problems and make it even more difficult to get back to a positive place. Loan sharks are unregulated and often resort to illegal methods when it comes to forcing consumers to make repayments. As a result of the sinister nature of this industry, the England Illegal Money Lending Team (IMLT) was established in 2004 to provide support to borrowers and to investigate and prosecute loan sharks. Although it initially began life as a pilot scheme in Birmingham, today the IMLT works across the country and has had a great deal of success.
Illegal money lenders (loan sharks) are identifiable in a number of different ways. For example, they might be offering a cash loan that doesn’t come with any paperwork or records. Frequently, the interest rates offered by illegal lenders are high and can change without warning, and there may be no transparency over how much is actually owed. Plus, loan sharks often resort to threats and taking possession of a borrower’s valuables without any right to do so. In 2010, more than 300,000 households in the UK were in debt to illegal money lenders. It was because of the growth in the illegal lending industry that the IMLT was established. So far, the team has provided support for more than 29,000 people and written off over £74.9 million worth of illegal debt.
While loan sharks may initially appear to be offering a solution to financial problems they are not regulated and frequently resort to intimidation and unfair practices. Many people borrow small amounts from an illegal money lender but find that they owe vast sums as interest escalates and random fees and charges are applied. Repayment can be requested at random and violence, or even demanding sexual favours, is not unknown when it comes to forcing repayments. As a result, research has found that victims of loan sharks frequently go without food or heating or skip payments on rent or mortgages just so that they can meet the demands that an illegal money lender has made. Many victims just don’t feel that they can fight back against loan sharks because they are powerlessness. The IMLT was established to support those who have fallen victim to loan sharks and to ensure that illegal money lenders don’t get off scot-free.
Loan sharks are often particularly insistent on consumers making repayments because an illegal debt cannot be enforced by law. However, this has also meant the IMLT has been able to write off a large number of these debts – some £75 million in total – and has been able to provide support for 29,000 people who were struggling as a result. The team has also been able to carry out prosecutions for illegal activity. This has included prosecutions for illegal money lending and also for other offences, including wounding, assault and rape.
Illegal money lenders prey on the most vulnerable people and communities, often starting out friendly and helpful and become increasingly intimidating and violent. It’s an industry that can do a lot of damage despite the fact that the loans aren’t actually legally enforceable. What the IMLT has done is to shine a light on the problems surrounding loan sharks, to provide support to the victims and to start holding people accountable.
If you’ve been approached by a loan shark you can report them here. For your own safety, you should never use an unregulated provider of credit. Make sure that you only use a credit broker or lender who is regulated by the Financial Conduct Authority, as Solution Loans is.
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