The Financial Blog

Sainsbury’s Finance research has revealled that British motorists could save an amazing £286 million altogether if they’d only haggle on the price of their new car.

There are around 1.5 million people looking to buy a new car and up to 195,000 do not plan to haggle over the price, even though on average they could save £1,468 each.

Sainsbury’s have launched a new service at www.sainsburysbank.co.uk/drive which negotiates a discount on behalf of the customer.

This service is available on every make and model of new car. I’ve checked out the web site and this is basically a car purchase plan where you decide to defer a lump sum to the end of the contract, which becomes the optional final payment.  The amount you defer is then taken from the purchase price which leaves you with an amount, divided by the term, is your fixed monthly repayment amount.

The average APR is 8.9 per cent, Typical. At the end of your contract you can decide what to do;

1. Change your car for another brand new one. (Once you’ve settled your current contract!)
2. Pay the optional final payment and the car is yours
3. Return the car and you owe nothing. (Subject to return terms and conditions)

It all looks OK, you can get quotes for different car makes and models but the prices don’t look that cheap to me! Mind you I would never buy a brand new car in the first place.

With around 25 per cent of new cars being financed with a personal loan it pays to shop about and compare loans to make sure you get the lowest interest rate possible for your circumstances.

Head of Sainsbury’s Loans Steven Baillie, said: “Our latest research reveals that the number of people looking to buy a brand new car has dropped by more than half a million on the previous six months.. Clearly people are more concerned about their finances and so those still looking to buy should haggle as hard as possible. Furthermore, those looking to finance their purchase through a loan need to make sure they shop around to find the best deal for them.”

Some of the benefits of getting a Sainsbury’s bank loan are that you can decide to make no repayments for the first 3 months, you get an instant decision and you can have a cheque delivered to your door with 24 hours.

Don’t forget!! Click here to compare loans before you decide on which loan to apply for…

According to Uswitch.com a staggering £20.9 million worth of unsecured loans were given last year with no proof of income asked for by the lenders providing them! Only 21 per cent of borrowers provided proof of their income.

This is really just one of a few amazingly poor statements that makes me think the banks or lenders, whatever you want to call them, have caused the credit crunch by lending money to people with little or no real concearn for their ability to repay what they borrow.

I watched a BBC programe this week where one of the financial experts said the bottom line with every single form of credit is that the borrower has to be able to repay the loan, whatever form it’s in i.e. a loan, a credit card or a mortgage - you must be able to afford repayments. This is what the banks have simply overlooked or chosen to ignore.

More Uswitch.com findings include;

• 45 per cent of people didn’t get a loan from their current account provider so the company lending them the money probably had little or no credit information on their customers.
• Nearly 1.3 million loans were given for debt consolidation purposes and less than 25 per cent of these people actually paid off existing debts with their loan.
• 26 per cent of borrowers who did not pay off their existing debt with the loan went on to borrow an additional £2,221 each, equating to an additional £744 million of debt!
• Very worryingly 6 per cent of people who got an unsecured loan then took on additional debt to try and keep up with repayments.

The total of unsecured loans borrowed last year was £29.9 billion, and the research from Uswitch.com reveals that around £20.9 billion of this would have been lent to people without them providing proof of income. Uswitch say that over 600,000 sucessful loans application forms didn’t even ask the borrowers how much they earnt.

Personal finance expert at uSwitch.com, Mike Naylor, said: “With more than 7,716 loan repayments being missed every day and record write-offs, you might think that lenders would have learnt their lesson, but the potential profits have clearly been too good to resist.  While the credit crunch has forced lenders to tighten up their lending criteria, these latest amendments to the Banking Code do not go far enough to help promote responsible lending in all cases.”

So I say agin, I think the lenders really only have themselves to blame for the credit crunch and it’s not fair that the consumers are left to pick up the pieces when banks increase interest rates, withdraw mortgage products and tighten lending criteria now that it’s all too late.

The banks shouldn’t have lent the money to half of these consumers in the first place…

Moneysupermarket.com say that an average British family could save over £4,000 a year if they compare products and make the switch to alternative banks, credit card and loan companies, energy suppliers, insurers, broadband and mobile phone providers.

Why not Spring clean your personal finances today? The Price Comparison Site Moneysupermarket.com explains how;

Head of debt at price comparison site moneysupermarket.com, Tim Moss said: “A family with a typical financial portfolio has the potential to save well over £4,000 in a year by moving away from uncompetitive products. There are many great deals out there, and not just for those with good credit ratings. While mortgages, credit cards and loan applications are helped by your credit score, getting the best home and car insurance, gas and electricity, current account and broadband prices and rates are very easy.”

Mortgages
Having a two-year £150,000 fixed-rate mortgage with First Direct at 4.95 per cent instead of with Northern Rock at 6.79 per cent will save you £2,010 a year in repayments, plus First Direct’s fee is £497 cheaper.

Loans
A typical three-year £10,000 loan with Tesco at 6.8 per cent will save you £157 per year compared to an Egg loan at 9.9 per cent.

Credit Cards
If you’re the usual type of credit card user, you will probably do a £2,000 balance transfer and then spend about £500 per month. But doing this on most credit cards, where the balance transfer and purchase offers are of different lengths, will potentially hit you with interest charges of over £300 over a year – as occurs with Egg. Halifax One, which offers 12 months on both balance transfers and purchases, will levy no interest.

Current Accounts
Reviewing your current account deal can prove an easy win, with Alliance and Leicester offering 8.5 per cent, as opposed to HSBC, NatWest and Barclays at 0.1 per cent. With a typical monthly balance of £2,500, you will earn an extra £210 with A& L.

Utilities
With the big six energy giants having shown their hands on price hikes, npower has proved to be the big winner. Its SOL10 tariff is significantly cheaper than every other provider. The 63 per cent of Brits still on a Standard tariff would be well advised to make the move. For example, a medium user of gas and electricity in Newcastle would save £363 by moving from Scottish Power Standard to npower SOL10.

Motor insurance and home insurance
The Association of British Insurers says the average person can save 35 per cent by comparing just five different policies for a single type of insurance. Therefore imagine how much you can save by comparing over 50 providers in a moment. For example, a good 35-year-old driver from Bromley with a 2005 Ford Focus would find a premium of £430 with Marks & Spencer, but £268 with LV=, a saving of £162.

For buildings and contents insurance for a three-bed semi in Milton Keynes, moving from Legal & General at £219 to 1st Quote at £87 will save £132.

Broadband
TalkTalk’s Talk 2 International has an 8Mb connection for £5.89 per month, with free evening and weekend phone calls. BT’s similar Option 3 product is £21.99 per month, so taking the TalkTalk option will save £193.

Mobile phones
Mix and Match 500 from 3 gets you 500 minutes or texts to use in any combination for £18 per month – £84 less than Vodafone at £25 per month for 25 fewer minutes.

Tim Moss added: “Traditionally, saving money has meant tightening the purse strings and cutting back on the things you enjoy. But this lucrative financial makeover can be made without changing your lifestyle – all it takes is some easy research to find the best deals. At over £4,100, this should be enough to persuade even the most reluctant saver to start their spring cleaning.”  

Product Annual saving

Mortgage £2,507
Loan £157
Credit Card  £301
Current Account £210
Utilities £363
Home Insurance £132
Car Insurance £162
Broadband £193
Mobile phone £84
Potential Total  Saving £4,109

Marks and Spencer Moneyis offering an amazing 25 per cent cashback reward to personal loan customers.

You must take out a loan between the 1st April and 3rd June 2008 and you must take out a loan over 36 months or more. You get 25 per cent of the interest you pay back, once the final loan repayment has been made. www.marksandspencer.com/loans

This is the first time I’ve heard of Cashback on personal loans and it’s definitely good news for the personal finance market and consumers looking to apply for a loan in the next couple of months. www.marksandspencer.com/loans

If you take into account the Cashback, the typical rate of 8.9 per cent APR for loans of £7,500 to £20,000 is equivalent to just 6.9 per cent P.A.

Cashback examples;

£7,500 loan over 36 months = £288.09 Cashback, over 60 months = £469.24 Cashback

£12,500 loan over 36 months = £480.15 Cashback, over 60 months = £782.07 Cashback

£15,000 loan over 36 months = £576.18 Cashback, over 60 months = £938.48 Cashback

Get to www.marksandspencer.com/loans from tomorrow and apply online!

Nearly 1 in 6 adults plans to cut their spending according to Moneyexpert.com research.

That equates to 26.3 million people cutting back this year, a sure sign that the credit crunch is really affecting people’s personal finances in the UK.

57 per cent of us plan to cut back over the next 12 months, 23 per cent of people on things like food shopping, 31 per cent of people on clothes shopping and 32 per cent will reduce the amount they spend on going out and general entertainment. A further 12 per cent of people won’t buy the car they planned to and 6 per cent will not be moving house.

Urging people not to panic, Sean Gardner of www.Moneyexpert.com said: “The credit crunch is moving on from being something that just affects bankers to having real effects on real people in the real economy.

“There is however a risk that we could talk ourselves into a recession by panicking unnecessarily. Certainly anyone who is struggling financially should be taking action but that has always been the case.

“There are still plenty of good deals out there and people with good credit records still have plenty of choice. There’s no need to panic.”

Access your Credit Report here…

Norwich and Peterborough Building Society have asked customers in its branches to provide tips on how to save money, the top 5 tips are;

1. Budget for utility bills and put aside money for times like Christmas in a separate savings or bank account
2. unplug all electrical items or at least ensure they are not left on standby
3. Plan a weekly food menu and do your food shopping based on the list! & Don’t go food shopping when you are hungry!
4. Use your ISA allowance every year if possible
5. Check your direct debits every month to make sure you’re only paying for things you should be

This is good general and practical advice considering the ever increasing cost of living over the last 12 months.

Group product manager at Norwich and Peterborough Building Society, Gary Lacey,said: “At N& P, we are committed to helping families and have asked our customers for budgeting tips to do just that. It is refreshing to see that it is often the simple tips that can prove most popular such as changing your shopping habits, or saving on the electricity bills. By adhering to just a few of the tips our customers suggested, families can save little and often, which, in the long run, could add up to a decent amount of money.”

“Those who put these budgeting tips into practice in order to save money may want to consider opening one of N& P’s new Family Savings Accounts in which to put the cash they save. By making the most of their savings, families will find they can put these funds towards more of the important expenses in life.”

Some of the less serious comments included;

• No pocket money for the kids
• Marry a millionaire
• Don’t daydream in the shower and waste water
• Cut down on champagne

If you’re interested in seeing more budgeting ideas then visit the online budgeting guide at www.familieslovenpbs.co.uk

The FSA has confirmed it wil be investigating the trading in UK financial shares in recent days.

Managing director, wholesale and institutional markets, Sally Dewar, said: “There has been a series of completely unfounded rumours about UK financial institutions in the London market over the last few days, sometimes accompanied by short-selling.  We will not tolerate market participants taking advantage of the current market conditions to commit abuse by spreading false rumours and dealing on the back of them.

“We remind market participants of the need to take extra care, in this market climate, to adhere to the market code of conduct.”

I think this may be referring to the Halifax Bank of Scotland rumours reported in the news yesterday…

Around 6.5 million people have consolidated debts in the last 3 years in order to try and keep in control of their debts. The new research from www.moneyexpert.com also shows that 1.29 million of the 6.5 million people have unsecured debts of more than £20,000. So that’s debts run up on personal loans, credit cards, store cards and overdrafts.

By ‘consolidation’ this research shows that 14 per cent of people have consolidated all their unsecured debts with 1 bank. www.moneyexpert.com also say that demand for secured loans has increased significantly over the last 6 months. Often people who are struggling to keep up with their debts turn to secured loans or homeowner loans in order to pay off unsecured debt with a loan secured on the equity in their home. The problem is something like 60 per cent of people who do this then continue to use credit cards and apply for personal loans stretching their finances to breaking point.

Chief Executive of MoneyExpert.com, Sean Gardner, offers some sensible advice. He said: “Anyone who is juggling a range of debts with money owed on credit cards, store cards and loans should be acting to get their debts under control.

“It is encouraging that so many people have taken action as you can make significant savings by moving all your debts to one place.

“With average standard credit card rates at 17.01 per cent compared to average unsecured loan rates of 8.44 per cent it is clear that borrowers can cut their monthly interest bill by moving.

“However it is crucial that borrowers see consolidation as a wake-up call to get debts under control. It shouldn’t be something you keep on doing simply to tide you over from year to year.”

Just a few weeks back the Financial Services Authority Financial Services Authority (FSA) hinted that getting cheap credit would no longer be an option in the future. Unfortunately for us they seem to be correct!

The latest research from http://www.Moneyfacts.co.uk reveals that unsecured loan costs are still increasing.

Analyst at http://www.Moneyfacts.co.uk, Michelle Slade, said:

• Unsecured personal loans
  “In the last year rates on unsecured personal loan interest rates have continued their upward trend. Average rates for all loan amounts are now up to 4.6% higher than they were in March 2007.
• “Smaller loans have seen the most severe increases. Twelve months ago, the highest rate for loans of £1K to £2,999 was 19.9% on loans from Marks & Spencer Money, Sainsbury’s Bank and Britannia BS. In March 2008, the highest rate has surged to 27.9% with the online loan from Black Horse.
• “Rates for larger sums have not escaped the rate hike, although the increase in rate for borrowing in excess of £3,000 has been less severe. In March 2007 Masterloan was offering rates of 5.9% for loans of £4K to £15K. Now the best deal available is 6.7% from Moneyback Bank on loans of £5K to £15K.
• “Anyone looking to take out a loan in 2008 is going to find themselves faced with having to shell out more by way of monthly repayments than they would have done over the last couple of years. The ongoing credit crisis has seen institutions concentrating on getting money in the door and becoming more expensive and selective when lending money out.
• “In May 2006 Northern Rock Northern Rock was offering rates of 5.6% for all loan amounts. This means that consumers taking out a £25K loan now compared with then will be paying a staggering £1,655 more.
• “As with all other areas of the lending market, banks and building societies will have been reviewing and tightening their lending criteria. With 97% of loans offering typical or personal pricing, consumers with less than perfect credit scores may find themselves offered rates higher than those advertised, or declined completely.

Secured loans

• “The secured loan secured loan market has also been feeling the pinch. Eight lenders including Alliance and Leicester, Money Partners and Picture Financial have all stopped offering secured loans in the last few months.
• “In line with the mortgage market, the amount that the lenders are prepared to offer has been slashed. Loans of 125% LTV are no longer available and only a handful of lenders will consider 100% LTV loans.
• “In March 2007 rates as low as 5.9% could be found. Now the best deal on the table is 6.4%.
• “With Bradford and Bingley announcing today that it is pulling all of its 100% LTV mortgages it will be especially worth keeping an eye on this market.
• “As borrowers are finding it more and more difficult to find a mortgage at 100% LTV they are likely to turn to secured loans to top up their borrowing.”
• “With the effects of the credit crunch continuing to bite, it seems likely that rates for all types of borrowing will continue to increase.”

6% loans are getting harder, if not impossible to find but there are still some good loan rates around, especailly if you take the time to compare loans via a comparison site.

The mainstream loans are heading towards 7% APR and the best loan rates I can find today start at 6.7%, take a look below;

A Loan of £5,000 over 4 years

Moneyback Bank http://www.moneybackbank.co.uk 6.7% TYPICAL APR

Barclaycard personal loan http://www.barclaycard.co.uk/personal-home/loans 6.8% TYPICAL APR

Your Personal Loan https://www.yourpersonalloan.co.uk 6.9% TYPICAL APR

Alliance and Leicester Loan http://www.alliance-leicester.co.uk/loans 6.9% TYPICAL APR

After the personal loan rates of around 6.9% there is an increase to 7.9% to 8%. These are the lenders offering loans;

Barclays personal loan http://www.barclayslowloan.co.uk 7.9% TYPICAL APR

Abbey personal loan http://www.abbey.com/loans 7.9% TYPICAL APR

Lombard Direct Online loan http://www.lombarddirect.com 7.9% TYPICAL APR

Sainsbury’s Bank loan http://www.sainsburysbank.co.uk/loans 7.9% TYPICAL APR

If you’re unsecured loan application is rejected you may have a bad credit rating so you’ll have no choice but to apply for a secured loan.

secured loans are available to people with a poor credit rating but only homeowners who are currently paying a mortgage. The loan is secured against the equity in your home so you are more likely to be accpeted for a secured loan. You should however remember that your home may be repossessed if you do not keep up repayments on your loan. Missing payments will have severe consequences and could make obtaining credit more difficult in the future.

You should always compare loans to find the best deal for your circumstances and seek professional financial advice if you are not sure.