The latest figures from the Finance & Leasing Association (FLA) have revealed that its members provided 17% less new consumer credit in the second quarter of the year (compared with the same period in 2008), moneyfacts.co.uk reports.
Both secured and unsecured lending markets had contracted, falling 84% and 43% respectively. Despite being down on an annual basis, however, store cards remained popular in the second three-month period of the year, with new business reporting a 5% rise in June.
A spokesperson for debt management company Gregory Pennington commented: "Although it is encouraging to see consumers taking on less debt, it is still important that when people do decide to borrow, they are aware of the small print.
"Understanding the difference between different types of debt is crucial before committing to any of them - and anyone who feels forced to take on any kind of debt should contact a professional debt adviser before doing so."
Thursday 3 September 2009
Wednesday 2 September 2009
Student debt not explained "effectively"
Student loans are not explained properly and it is giving across a potentially damaging message, according to an industry expert.
Chris Tapp, director of financial education charity Credit Action, noted that it is not properly clarified how student debt differs to credit cards and overdrafts.
He claimed that it is "basically impossible" to get into difficulties with student loans because of the way they are paid back - and so the message being put across is that it is fine to be in debt.
Mr Tapp feels that if students take this message on board then they may sign up for credit products which could land them more serious debt problems.
Describing the level of explanation students are given of how the loan works, he said: "I don't think that's been done as effectively as it could have been by the government and others."
Research from Push.co.uk indicates that students who started their university course in 2008 will owe nearly £21,200 when they leave.
Chris Tapp, director of financial education charity Credit Action, noted that it is not properly clarified how student debt differs to credit cards and overdrafts.
He claimed that it is "basically impossible" to get into difficulties with student loans because of the way they are paid back - and so the message being put across is that it is fine to be in debt.
Mr Tapp feels that if students take this message on board then they may sign up for credit products which could land them more serious debt problems.
Describing the level of explanation students are given of how the loan works, he said: "I don't think that's been done as effectively as it could have been by the government and others."
Research from Push.co.uk indicates that students who started their university course in 2008 will owe nearly £21,200 when they leave.
Debt burden of retirees 'growing'
The debt burden of retired people in the UK is growing with a third in the red on loans and credit cards, according to a poll by Scottish Widows.
Retirees with outstanding non-mortgage debt owed an average of £7,344, up from £6,732 in the same poll a year ago.
Some 15% of retired people were also still paying off a home loan, with an average debt of £50,100, up £8,000.
Some grown-up children are still financially reliant on their older parents, the poll also found.
It suggested that 7% of retirees were still paying towards the upkeep of the children who have reached adulthood.
'Alarming'
"The situation for retirees in debt is not getting any better, and an increase of £8,000 in the average amount of mortgage debt is alarming," said Ian Naismith, head of pensions market development at Scottish Widows.
"The recession has seemingly done nothing to encourage retirees to cut their debt, and with the possibility of the value of their property dwindling, they could be leaving themselves in a vulnerable position.
"Those in retirement should be able to enjoy life and not worry about the financial burden of debt, as well as their retirement income."
Those approaching retirement were also saddled with debt, Scottish Widows found, with 43% still paying off a mortgage. The average outstanding mortgage debt had fallen in a year, however, down from £58,300 to £57,000.
The poll surveyed 5,007 people, although fewer than 1,000 in the survey were retired homeowners.
Retirees with outstanding non-mortgage debt owed an average of £7,344, up from £6,732 in the same poll a year ago.
Some 15% of retired people were also still paying off a home loan, with an average debt of £50,100, up £8,000.
Some grown-up children are still financially reliant on their older parents, the poll also found.
It suggested that 7% of retirees were still paying towards the upkeep of the children who have reached adulthood.
'Alarming'
"The situation for retirees in debt is not getting any better, and an increase of £8,000 in the average amount of mortgage debt is alarming," said Ian Naismith, head of pensions market development at Scottish Widows.
"The recession has seemingly done nothing to encourage retirees to cut their debt, and with the possibility of the value of their property dwindling, they could be leaving themselves in a vulnerable position.
"Those in retirement should be able to enjoy life and not worry about the financial burden of debt, as well as their retirement income."
Those approaching retirement were also saddled with debt, Scottish Widows found, with 43% still paying off a mortgage. The average outstanding mortgage debt had fallen in a year, however, down from £58,300 to £57,000.
The poll surveyed 5,007 people, although fewer than 1,000 in the survey were retired homeowners.
Families pay off £600m of debt: Hard times bring first recorded fall in money we owe
Personal debt has fallen for the first time on record, wiping £600million off the amount owed to banks and other finance giants.
The change follows decades when personal debt - mortgages, credit cards, overdrafts and loans - soared above £1trillion as the nation adopted a 'live now, pay later' philosophy.
The reliance on personal debt fuelled the consumer and property boom of the last decade which was encouraged by banks hungry for business and profit.. The fall in personal debt points to a new austerity among customers now reluctant to leave their futures and finances at the mercy of discredited financial institutions.
Many are getting such poor returns on their savings that they are using spare cash to pay off debts and mortgages.
The record low interest rates of the past year have created room for home buyers to pay off more than the minimum sums required on mortgages.
Similarly, people have been reluctant to borrow and spend through credit cards, overdrafts and loans.
However, the other side of this equation is the fact that the banks are rationing credit.
There is evidence that the billions of pounds pumped into the financial system by the Bank of England is effectively piling up in the vaults of financial institutions rather than being loaned to consumers.
The seizing up of the credit market poses dangers for the economy for it will hamper any exit from the recession and return to economic growth.
Credit is necessary to boost spending on the High Street and orders for manufacturers.
Figures from the Bank of England show that personal lending fell by £600million in July to £1.457trillion. This is the first fall since records began in 1993.
Net mortgage lending came down by £400million. Consumer credit through credit cards, loans and overdrafts came down by £200million.
Despite the net fall in mortgage lending, there has been an increase in the number of new loans for home purchase, which is in tune with recent reports that the property market is past the worst of the bust.
There were some 50,100 home purchase loans in July, the highest number of monthly approvals since April 2008. It compares to a low point of 27,300 in November last year, but is still well below the 60,000-70,000 consistent with a healthy housing market.
The Centre for Economics and Business Research said the net fall in personal lending would worry both the Bank of England and the Government.
It suggests the £175billion pumped into the system through so-called quantitative easing is not getting through.
The change follows decades when personal debt - mortgages, credit cards, overdrafts and loans - soared above £1trillion as the nation adopted a 'live now, pay later' philosophy.
The reliance on personal debt fuelled the consumer and property boom of the last decade which was encouraged by banks hungry for business and profit.. The fall in personal debt points to a new austerity among customers now reluctant to leave their futures and finances at the mercy of discredited financial institutions.
Many are getting such poor returns on their savings that they are using spare cash to pay off debts and mortgages.
The record low interest rates of the past year have created room for home buyers to pay off more than the minimum sums required on mortgages.
Similarly, people have been reluctant to borrow and spend through credit cards, overdrafts and loans.
However, the other side of this equation is the fact that the banks are rationing credit.
There is evidence that the billions of pounds pumped into the financial system by the Bank of England is effectively piling up in the vaults of financial institutions rather than being loaned to consumers.
The seizing up of the credit market poses dangers for the economy for it will hamper any exit from the recession and return to economic growth.
Credit is necessary to boost spending on the High Street and orders for manufacturers.
Figures from the Bank of England show that personal lending fell by £600million in July to £1.457trillion. This is the first fall since records began in 1993.
Net mortgage lending came down by £400million. Consumer credit through credit cards, loans and overdrafts came down by £200million.
Despite the net fall in mortgage lending, there has been an increase in the number of new loans for home purchase, which is in tune with recent reports that the property market is past the worst of the bust.
There were some 50,100 home purchase loans in July, the highest number of monthly approvals since April 2008. It compares to a low point of 27,300 in November last year, but is still well below the 60,000-70,000 consistent with a healthy housing market.
The Centre for Economics and Business Research said the net fall in personal lending would worry both the Bank of England and the Government.
It suggests the £175billion pumped into the system through so-called quantitative easing is not getting through.
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