“Interest rates on loans hit nine-year high (Independent)” plus 2 more |
- Interest rates on loans hit nine-year high (Independent)
- Business owners opt for personal insolvency (Daily Telegraph)
- Federal SBA loans available to victims of recent flooding (L'Observateur)
| Interest rates on loans hit nine-year high (Independent) Posted: 01 Feb 2010 06:43 AM PST
Interest rates charged on personal loans have hit a nine-year high as banks continue to shy away from unsecured lending, research showed today. The average rate for a £5,000 loan repaid over three years is currently 12.4 per cent, despite the Bank of England base rate being at a record low of just 0.5 per cent, financial information group Moneyfacts.co.uk said. The last time loan rates were this high was in 2001, when a comparable deal averaged 12.5 per cent, but the base rate was 12 times higher at 6 per cent. Interest rates on loans have been forced up by a combination of a lack of competition in the sector as banks become increasingly reluctant to do unsecured lending, and higher pricing for risk in the face of rising default rates. Three-quarters of banks now restrict personal loans to their existing customers only, and nearly all of them employ so-called risk-based pricing, under which the rate charged is tailored according to the borrower's creditworthiness. The stagnation in the personal loan market is illustrated by figures released by the Bank of England today, which showed that borrowing through both loans and overdrafts contracted during all but one month of 2009. Michelle Slade, spokeswoman for Moneyfacts.co.uk, said: "Banks don't want to lend on personal loans as, unlike on a mortgage, there is no security that a loan debt will be repaid. "They are pricing that risk into their rates and they are trying to deter people from taking them out. "In such a risk-averse market, lenders are only offering loans to the most creditworthy applicants and then at a premium." The best buy rate offered on a personal loan is also at a nine-year high of 8.9 per cent, offered by Alliance & Leicester on a loan of £5,000 taken out over three years. This compares with a rate of just 5.7 per cent in 2006, and is the highest rate to top the tables since Northern Rock was leading the field with a deal of 9.4 per cent in 2001. Moneyfacts said the lack of competition in the market was highlighted by the fact that the usual post-Christmas "loan sale", when lenders discount their rates to attract borrowers, failed to happen this year. It urged borrowers thinking of taking out a loan to shop around, as the difference between the current best buy rate of 8.9 per cent and the worst deal available of 19.9 per cent, would cost £1,055 over the three-year term of a £5,000 loan. But it warned people to be wary of making too many applications, as the credit searches lenders do to assess borrowers could reduce their chances of being accepted by other banks. '); } else { document.write('Five Filters featured article: Chilcot Inquiry. Available tools: PDF Newspaper, Full Text RSS, Term Extraction. This posting includes an audio/video/photo media file: Download Now |
| Business owners opt for personal insolvency (Daily Telegraph) Posted: 01 Feb 2010 10:44 AM PST A growing number of small business owners are opting for personal insolvency in a desperate attempt to keep their company afloat, research shows. Bosses have been using credit cards to finance their business and been prepared to pay the consequences when pressed by card companies to settle their accounts to protect their company. Official figures recorded a sharp rise in personal insolvencies in the first nine months last year, masking what economists feel would have been a bigger increase in total business failures during the depths of the recession. Full-year figures out on Friday will provide further insight into whether the trend has been maintained. In the third quarter alone, company liquidations were down almost 13pc at 4,716 on the corresponding period in 2008, while personal insolvencies jumped 28.2pc to 35,242. The greater use of credit cards is just one of the alternative finance routes being used by small business owners as they struggle to raise bank finance on favourable terms. Loans from friends and family and asset sales have also made a contribution, with the result that over the last two years around £45bn has been raised by small companies from non-banking sources, according to data from CreditPal. The "fear factor" has played a part in accelerating the switch from traditional bank and building society fund-raising avenues, researchers believe. Chris Poll, chief executive of CreditPal, said: "Thousands of small and medium-sized enterprises (SME) have been forced to rely on credit to survive in the last two years as a result of disruptions to business cashflow. "We believe we have identified an SME fear factor at play, with companies more likely to seek finance from non-traditional sources because they are scared of even applying for finance from banks and building societies." The CreditPal survey also showed that 15pc of the sample sacrificed family holidays in an effort to conserve cash. Pension funds have been raided in a small number of cases, while some business owners have pulled children out of private education in the search for economies and extra finance. After surveying 10,000 of its members, the Federation of Small Businesses estimates that 41pc of them dipped into personal savings, 43pc used overdrafts and 21pc their credit card to stave off the recession. Another survey, of 750 businesses by Graydon UK and the Forum of Private Business, showed 28pc of owners turning to friends, relatives and fellow directors for funding, while 8pc used personal credit cards. In the second half of last year 40pc of companies failed to raise finance, with 52pc of them refused business loans and 38pc told they would not be given an extension on their overdraft facilities. Business owners see little relief in sight this year, with almost a fifth citing access to finance as their biggest headache. The study suggests SMEs will need additional average funding of £113,731 this year, with 60pc of the total expected to come from banks. Meanwhile, almost one-in-four businesses surveyed by Aviva UK Health said the economic struggle has had a lasting impact on employee stress levels, leading to a rise in long-term absence rates. Five Filters featured article: Chilcot Inquiry. Available tools: PDF Newspaper, Full Text RSS, Term Extraction. This posting includes an audio/video/photo media file: Download Now |
| Federal SBA loans available to victims of recent flooding (L'Observateur) Posted: 01 Feb 2010 06:43 AM PST Comment posters are responsible for the opinions they express and the accuracy of the information they provide. We urge comment writers to treat this as a public forum where manners matter. We encourage a collegial, non-insulting tone. All readers comments must be approved by our staff before posting to the Web site. Be aware, in accordance with the Communications Decency Act and provisions upheld in judicial appeal, that you are responsible for comments posted on this Web site. The L'Observateur is not liable for messages from third parties.
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