Ok, so you want an unsecured loan but you have a tiny bit of iffy poor credit in your credit file. Practically nothing main like County Court Judgements or defaults but you may have received some late payments in your mobile phone bill along with a individual loan but importantly, you produced the payments up within the month in query so they are not officially in arrears. Just a little bit late. So that's okay is not it?
Nicely no really it is not. Does this sound familliar?
Naturally it does due to the fact this predicament is typical of what millions of British people today encounter just about every year. A couple of blips on their credit profile and all of a sudden no-one (in the banking and money sector definitely) would like to learn them anymore. Now as ex - lending executives ourselves who were heavily involved in the subprime home loan sector in advance of it went bump, we realize that this condition is not brand new but far more essentially, what has took place given that is worse nonetheless. Then, financial institutions who would lend to folks with pretty bad credit profiles pulled from the market entirely as well as the outcome was that all remaining loan providers, home loan lenders along with other fiscal institutions received scared and went thus far the other way, that even someone with just one late payment on the catalogue or mail purchase account was considered a risk.
Which takes us to the place we're at now as well as the sheer lack of lending solutions for folks with an imperfect credit historical past. Proficiently, they've got a option of one particular product or service; a guarantor loan. This solution apart (and in the event you discount payday advance that are capped at £1,000 and will have to be paid back inside of 30 days) there may be nothing whatsoever accessible to an individual who does not very own their very own home.
Not a single loan product or credit service anyplace in the UK and even well known master brokers such as Whitestar Money would struggle to lend to them.
However there can be a (tiny) glimmer of hope around the horizon: The development in peer to peer lending.
Peer to peer lending is really a reasonably new idea which appeared online a number of many years in the past but has now built up speed (and even more importantly - outside funding) and it is in danger of getting mainstream together with the likes of Zopa bringing credibility to a recently unfamiliar sector. Efficiently it functions like this:
Investors who're searching for any much better return around the cost savings will invest small tranches of cash in Zopa. This will likely only be done when the investor has determined on the level of chance they're ready to take and at what fee and for how extended they may be ready to lend their revenue out. The investor as well as the borrower by no means speak or maybe know who one another is so it is all entirely discreet.
The main reason this will work is since the amount of threat for your investor is minimal because their funds is often extra to a 'pot' and their share of that pot might only be ?500 or ?600. Nonetheless the upside for your investor is that they are going to get a much higher rate of interest when compared with what they'd acquire inside a bank and even a creating society.
So what does this imply to the potential of personal finance?
Properly firstly it puts banks in the quite difficult place because if this takes off (and Zopa continues to be trading for 8 years and it is developing 12 months on year) then there will basically be no require for banking institutions inside the individual or client finance sector. There isn't a query that if matters remain as they are, peer to peer lending will gather far more speed in 2012 and past.
And it isn't going to end there.
Businesses like Ratesetter and Funding Circle do nearly exactly exactly the same matter for corporations on the lookout for loans or finance and again, the two are very profitable and therefore are exhibiting growth year on 12 months. In addition they came about as a consequence of the banks reluctance to lend to smaller firms and their popularity and virtually instant achievement demonstrates that there is a genuine need for new and ground breaking lending items.
The only fly from the lending ointment is the fact that so far (even though it is difficult to inform from just on the lookout at their sites - plus they tend not to publish the average credit profile of their consumer base) they don't appear to cater for anyone consumers with slight credit score complications (and we are not discussing 'heavy' bad credit like bankrupts and individuals in an IVA or debt management strategy) and that is wherever the biggest difficulty lies simply because after all, if somebody includes a great credit score history they could just visit their bank.
So in conclusion, peer to peer lending displays massive guarantee but until eventually they might appeal to a broader market the way guarantor loans do, they will struggle to create an affect from the niche unsecured lending sector.
To read through more about each of the corporations I've mentioned over, possess a search at this independent review within the peer to peer lending sector from Which.
How to save money in 2014
2014 is well and truly underway and with a new year comes new plans, aspirations and dreams. Whether it?s a new home, addition to the family or that dream holiday you've been meaning to go on for years these things don?t come free so you may need to tighten your already bulging belt.
Saving money is never easy but we have come up with a few things that may help you. Ask yourself all of the following questions.
Can you switch your expensive credit card balance?
There are millions of people in the uk that have used their credit cards to help themselves out of a sticky situation especially over the Christmas period. Switching your balance to a credit card with a cheaper interest rate will make your monthly payments cheaper enabling you to save some cash.
Any unwanted items in your home?
I?m sure like many people you have been meaning to de-clutter your home for a long, long time! You are never going to wear the clothes you have been saving from your youth and VHS players are never going to make a come back!
You may think that all of your old belongings are only fit for the bin but I have always been told your trash is someone else?s treasure. You will never make back what you have spent on your stuff but every little helps.
Are there any of your Direct Debits and Standing Orders you can get rid of?
Why don?t you have a look at all of your payments that leave your bank account every month? There are probably several outgoings that are not essential and you could reduce or remove all together. For example: do you need the full Sky package? Are you getting the full usage from that expensive gym membership? The answer to these questions will quite often be NO.
Reducing these payments or removing them from your outgoings is always a great way to start you off on your money saving crusade.
Is there any way you can move your mortgage to a lower fixed rate deal?
Mortgage rates are now pretty low which means now is as better time than any to have your payments fixed for the foreseeable future. Why not benefit from a five-year fixed rate from some of the highstreet banks at 3.79% with no product fee. Based on a 20-year mortgage term, you are able to reduce the payments you make per month from around ?652 to something like ?595. This is a great saving of 57 per month which certainly adds up over the year, adding massively to your savings fund.
Can you make a homemade lunch?
Are you spending your wages on buying your lunches from expensive delis? Why not make your own lunch at home before you leave for work. You will often find that when you buy the components for your lunch when buying your weekly shop at your local supermarket you will save lots of ????s and will probably be tastier?.
Why don?t you change the way you shop?
To do this you will need to plan your meals and only visit the supermarket once a week. Look out for their offers especially on fresh meat, fish and bread. Don?t worry if you over buy, you can always freeze them! Don?t go to the smaller convenience stores as they are always more expensive. After all you are paying for the ?convenience?.
Hopefully after you have done a few of these things you will find yourself with that extra bit of cash that can be put straight into your savings account. Remember this is spare cash that would have gone on other things but will now go towards the things you want to do this year and won?t even be missed.
Why don't banks offer bad credit loans?
Why don't banks offer bad credit loans
Because banks all about risk. Never then then somebody money or extending overture to an individual it is always on the basis that will get their money back and yet there is the conundrum, please banks only make money generally speaking, when their clients do not pay on time as they make money on charging late payment fees, so the fact that they do not offer individuals with a poor credit history alone, is one of the mysteries of modern times.
And yet during the credit crunch of 2007/2008, all of the UK banks had a sub-prime lending arm that allowed people with an adverse credit history to obtain mortgages, even if they were self-employed for just a few months and even if they were self certifying their own income.
Ridiculous doesn't even come into it.
The other reason why banks do not offer bad credit loans is because it's not just about financial risk for them it is also about reputational risk, so whilst they are happy to lend money through subsidiaries that do not bear their name, they are not happy to lend money under their own name because this way means that they will not be able to hide what they do from their shareholders and in the stuffy world of banking, pleasing their totally old shareholders is of paramount importance.
However as I have stated in another post elsewhere, all the current adverse credit loan lenders are being funded by UK banks. Strange but unfortunately true. Go to sleep
Guarantor loans for any purpose
We offer guarantor loans to UK residents. A guarantor loan is similar to other types of unsecured loans in that you do not need to have a property to offer as security for the loan. This means that if you didn’t pay repay your loan for any reason, then the loan company could repossess your house, sell it and then get their loan back from you the proceeds of the house sale. Unsecured loans like tenant loans, guarantor loans and car loans are often quicker and simpler to apply and obtain and the whole process is fairly painless as long as you are aware of the process and what you need to do to help push the loan through.
The only downside of an unsecured loan is that because there is no security such as a house being offered to the lender, obtaining an unsecured loan can be a lot more difficult because if you don’t repay your loan, the lender has no way of getting their money back. This means that banks and loan providers often make sure that the only people they lend money to are people with a good credit history as anyone with bad credit will simply get turned away for being a bad risk
However, if you applied for an unsecured loan with a guarantor, then you are almost guaranteed to be accepted because the credit check is carried out in the guarantor, not the borrower, so even if you applied for a loan and you had terrible credit with a history of missed payments on cards and other loans then the lender will still accept you simply because if you don’t repay the loan for any reason, then it will be the guarantor, not the borrower who has to repay the total loan. So in effect, a guarantor loan becomes a completely risk free product for the lender.
There are certain stipulations as you would expect, if you are looking to apply for a loan with a guarantor. The guarantor must be in full time employment or have a regular passive income like a pension and they must have a decent credit history with none of the issues regarding poor credit that I mentioned earlier. Then all that happens is that the borrower gets the loan paid into their bank account and makes the payments every month and the only time that the guarantor comes into the equation is when the borrower can not or will not repay the loan. Then it falls to the guarantor to repay the full loan amount outstanding.
Literally anyone can become a guarantor and this type of loan is becoming so much more popular because more people are suffering from bad credit and general credit problems. It can be a family member, friend, colleague or even a neighbour, in fact anyone can be put forward as long as they agree to the conditions of the contract that they are entering into, however, most guarantors are aware of the possible pitfalls before they sign up to any loan agreement.