Many people who fall into bankruptcy and repossession are proven to have unsecured debts like credit cards and store cards – risky unsecured expensive debt can be the end for some people.

A survey by insolvency practitioners R3 shows that 66% of those who deal with bankruptcies and insolvencies have dealt with cases where people have signed up for a store card without understanding what they had let themselves in for – nearly 80% of insolvency practitioners believe that consumers view spending on store cards as less ‘real’ than spending in cash and so unwittingly go over budget.

Unsecured debt like store cards is bad for so many reasons. It was designed to make people spend way beyond their means, it doesn’t often show the real rate of repayment people will be saddled with after a spending spree, and it only adds to a person’s negative credit score – the more unsecured debt someone amasses the less chance they have of securing good debt like a mortgage in the future.

Peter Sargent, president of R3 says: “Offering store credit at the point of sale means that many vulnerable consumers do not grasp that they are entering into a legally binding contract. Store cards must be handled just like any other credit card. This advice guide was designed to make consumers stop and think. We can’t stop people from using store cards but we can show them how to make sure the store card works for them.”

If your store cards are too much for you, talk to a professional mortgage adviser about moving your risky debt onto your mortgage. By consolidating debt you may find that your outgoings shrink, your worries diminish and you have the chance to finally pay off debt instead of massing it.

SOURCE: R3, 23/02/10

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On average, the money earned by Brits over the first 50 days of the year was just enough to cover the interest payments on their debts for the year, according to Unbiased.co.uk.

That is the equivalent of one day’s wages a week going towards servicing debts – for many this is just too much. It’s hard enough to cover the interest payments let alone work towards paying the debt off. Unbiased says figures show that credit card debt has increased by just over £4bn in 2009, reached over £54bn because people just can’t pay it off.

For some people the answer may lie in secured consolidation. By using your home to pay off your unsecured debts you are able to reduce all your outgoings to just the one payment. This means less outgoings from one month to the next and more importantly it means the borrower has time and space to pay off their debt, not just manage it.

Karen Barrett, chief executive of Unbiased.co.uk says: “Debts can quickly mount up to a considerable sum and this date demonstrates that debt is something that we need to take control of and actively manage.

“Tackling your debt doesn’t have to be a daunting task and you don’t have to do it on your own. With interest rates at an all time low, now is a better time than ever to action. Seeking independent financial advice will make sure you are making the right choices on your finances.”

SOURCE: Unbiased.co.uk, 19/02/10

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It seems that the credit crunch and resulting great recession has done little to teach many Brits of the dangers that come from over-leveraging oneself with risky, unsecured debt.

Research from moneysupermarket.com has discovered the depth of reliance Brits have on unsecured debts – the research found that one in five of us carry more than three credit cards and that 17% of credit card holders use their card at least once a day.

The research also discovered a worrying trend in that over 14 million Brits are using their credit cards to fund day to day expenses. People have still not learned that unsecured debt is a short-term solution and is not the answer if you cannot afford something.

Peter Harrison, credit cards expert at moneysupermarket.com, says: “Credit cards are still playing an important role in the nation’s finances. Our research makes clear the extent to which many of us rely on credit cards at frequent intervals in our lives although it’s alarming to see that so many people are using credit to pay for day to day expenses as this can be a dangerous habit to get into.

“Also, holding more than two cards does expose you to a large amount of credit, which may not be financially healthy and could make it difficult to obtain further credit in the future.”

If you are relying on unsecured debt to get by day-to-day then you need to seek out some expert help. Talk to a mortgage adviser about restructuring your debt and using safer secured options to get by. Credit cards will only lead to more debt pain and will only result in not being able to afford more, for longer.

SOURCE: Moneysupermarket.com, 15/02/10

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Even though the Bank of England’s base rate is at an all time low and has been for nearly a year, rates on risky unsecured debts are at a 12-year high.

Since 2006 as the economic downturn took hold, credit card rates have steadily increased, with the average rate today hitting a 12 year high of 18.8%, according to Moneyfacts, and now they are higher than they were at the end of the nineties.

Michelle Slade, of Moneyfacts says: “The UK continues to suffer from a high level of unemployment and providers are worried about the increased risk of customers not repaying their debts. This increased risk continues to be passed on to both new and existing credit card customers through higher rates.”

The website says that borrowers with £5,000 debt on the card, who just repay the minimum each month, will now repay an additional £2,289 over the life of the debt than they would have in February 2006.

Of course, on top of that there are charges such as balance transfer, cash withdrawal and foreign transfer fees also continuing to go up, leaving unsecured debt customers paying more across the board.

Andrew Hagger of Moneynet.co.uk says: “Just because you sign up to a card with an attractive rate, it doesn’t mean it’s going to remain that way, with increasing numbers of customers receiving notification that their rate is being hiked even though they are adhering to the terms and conditions of their agreement.

“With the UK suffering from a surge in unemployment and the potential of more job losses to come if public spending is curtailed, just as with unsecured personal loans, it’s no surprise to see rates remain stubbornly high.”

If your unsecured debts are rocketing and becoming even harder to manage it might be time to move your unsecured debts onto your mortgage. By consolidating your unsecured debts onto your secured asset you may find you pay a lower rate. That means you have more money each month to pay off your debt, not just service it. Talk to a mortgage expert about moving your debt to a cheaper, safer alternative.

SOURCE: Moneyfacts.co.uk, Moneynet.co.uk, 16/02/10

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Secured debt lenders think that there are going to be more repossessions in 2010 as more people fall behind with their payments for mortgages, loans and other debts.

According to Moore Blatch, 67% of mortgage lenders and foreclosure experts are predicting an increase in the number of repossessions in 2010. They think that more people will simply be unable to keep up with paying their bills and the lenders will have no other choice but to take the property.

Of those who are predicting an increase in repossessions, 50% believe repossessions will rise by as much as 5%, while 17% believe a rise of as much as 15% and a further 6% foresee a rise in repossessions of over 15%. They think that growing debts will be the main reason for repossession, but unemployment and the possibility of rising interest rates may play their parts too.

But there are not all as pessimistic – more than a quarter of lenders thought there would be no change in repossessions in 2010, while 6% believe there will be a decrease.

Paul Walshe, head of lender services, Moore Blatch says: “The Council of Mortgage Lenders revised, and subsequently lowered their 2009 predictions for repossessions to 48,000 in 2010. However, much of this fall was due to the the Government’s initiative to provide consistency in lenders’ approach to repossessions. This created a bottleneck which will start to clear in 2010.

“Sadly, the underlying cause of repossession, being excessive borrowing, is still causing people to default on their mortgages.”

If you are struggling to pay your secured debts, you must talk to an expert right away. The lenders might be right and more people might not be able to handle rising rates, fees, penalties and short-term debt pressures. Do what you can now before you find there is no way back.

SOURCE: Moore Blatch, 10/02/10

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New statistics have revealed that in the final three months of 2009, secured loan lenders repossessed 37% less properties than in the same period a year earlier.

Figures released by the Finance & Leasing Association show that second-charge mortgage lenders took possession of almost ten percent fewer properties in 2009 than they repossessed in 2008. Overall, they repossessed 1,458 properties in 2009, 9.2% down on 2008 and below the FLA’s original forecast of 1,522.

Fiona Hoyle, head of consumer finance at the FLA, says: “Second charge lenders are doing all they can to help customers in financial difficulties and this is reflected in the low number of repossessions. But many people are still struggling with repayments and this looks set to continue during 2010. Repossession will remain a last resort.”

If you are struggling to pay your second-charge mortgage you should not assume that your lender simply will not repossess you because they are showing more forbearance – if you do not act right away your property is still in jeopardy.

To make sure you are one of the lucky ones who does get to keep their house, you need to be proactive. Talk to your lender, your mortgage broker, debt advisers or debt charities – do anything, but make sure you tackle the problem head on, right away.

SOURCE: FLA, 11/02/10

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It is not just us regular people who suffer from secured debt problems – according to the Mail on Sunday, even Conservative MPs can wind up having their homes repossessed.

The paper recently reported that one of David Cameron’s rising stars had her house repossessed over an unsettled debt of £324,000. Adeela Shafi opened the 2008 party conference and tipped to be an important MP if the Conservatives came into power this year.

But that did not stop her mortgage lender seeking a county court judgement over £324,000 owed by her after she missed mortgage payments. This led to a judge deciding that the home had to be repossessed. But her miseries didn’t end there – the paper says that the property had to be sold for a knockdown price of £250,000 and now Shafi is liable for the remaining £74,000.

This tale highlights two things – one, if you do not keep up repayments on your debts then you can lose your home, whoever you are. And two, if you get into serious difficulty and receive court judgments then you need to find some expert help fast to stop the courts taking your home.

If you are struggling with your mortgage or any other secured debt, talk to a financial professional before you lose your home. It doesn’t matter who you are or what job you have, defaulting on your debts is a serious issue.

SOURCE: Mail on Sunday, 06/02/10

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A consumer debt charity has warned that more and more Brits are falling into insolvency because they cannot handle their secured and unsecured debts.

The Consumer Credit Counselling Service recommended insolvency to 39,663 of its clients – that’s an annual increase of 93% in overall insolvency recommendations.

More than 20,000 people came to the charity and were recommended bankruptcy, nearly 12,000 were recommended Individual Voluntary Agreements and more than 7,000 offered debt relief orders in the last 12 months.

Delroy Corinaldi, CCCS director of external affairs says: “Although there has recently been positive signs in the economy, our figures highlight the high numbers of people with unmanageable debt, for which insolvency is the most appropriate solution.”

There is no doubt that those people who came to the CCCS were in need of an insolvency, but it needn’t get that far. Insolvencies are literally the last throw of the dice and are very difficult to come back from. Between that first red letter through the letter box and insolvency there are a world of options to consider.

If you are struggling with your secured and unsecured debts, talk to a mortgage adviser about those options before you run out of them.

SOURCE: CCCS, 04/02/10

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Thanks to the continuing tough economic climate, the focus in all lending activity is risk and as a result unsecured personal loans have seen some of the sharpest increases of recent times.

In fact, personal loan rates stand at a nine year high, according to Moneyfacts. Lenders are unhappy to offer money to people with no security. On the other hand, lenders are still offering money to people who are able to afford to secure debt against their home, safely.

Michelle Slade, analyst for Moneyfacts says: “Unlike on a mortgage, there is no security that a personal loan debt will be repaid. In such a risk adverse market, lenders are only offering loans to the most creditworthy applicants and then at a premium.”

The website says there is now a £1,055 difference between the cheapest and most expensive £5,000 personal loan – for those people who are unable to secure the cheapest deal, that’s expensive money indeed.

Andrew Hagger of Moneynet.co.uk says: “With banks and building societies still adopting a far more cautious stance even when it comes to mortgage lending, even with your property as collateral, it’s no surprise that the appetite for unsecured lending has pretty much dried up.”

If you want affordable loans, you need security in 2010, and that is only possible with a secured loan or a mortgage. Talk to a secured finance specialist about your ability to use your home as a means of getting hold of cheaper credit.

SOURCE: Moneyfacts, Moneynet, 01/02/10

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The Government has released detailed plans to control the sale and rent back market, good news for secured borrowers who are suffering with their debts.

The Financial Services Authority has released full regulation of Sale and Rent Back – particularly the much stricter conditions on promoting these schemes and making sure that people in debt trouble are not abused.

Sale and Rent Back is targeted at those who are in financial difficulties who may be vulnerable to selling techniques which obscure the downsides. The last thing those who are struggling need to hear is a cowboy pouring honey into their ear, telling them that they should sell their home to pay off their secured and unsecured debts.

As a result, the FSA says it will be banning cold-calling, leaflet dropping and the use of emotive phrases in promotional material will be crucial, along with tighter monitoring of the activities of these firms.

Adam Phillips, chairman of the Financial Services Consumer Panel says: “Sale and Rent Back can provide rich pickings for firms seeking to make money from people who are desperate. Firms have been able to lure vulnerable people into deals which they later regret when the rent rises or they lose their home: people see the promise of being able to stay in their own home and get cash up front quickly, without necessarily being warned of the longer-term consequences.

“However, we still have worries that firms will try to exploit consumers both within the rules, and by trying to operate outside the rules. The fact that only around 80 firms have applied for FSA authorisation, when the OFT had judged that there were over 1000 firms undertaking sale and rent back, means the FSA must watch the authorisation boundary carefully.”

If you are at your wits end, only ever consider selling your home and renting it back after your have spoken to financial advisers, your lenders, debt charities and your family. It can be a sensible option, but only to a small minority – for the other struggling secured borrowers there are always less severe options.

SOURCE: FSA, FSCS, 29/01/10

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