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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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

To keep up with the latest news and comments on current financial affairs please visit the Secured Loan Blog

If you have unsecured debt it’s better to pay it off when you can so as to be able to get hold of secured, cheaper debt when the time is right.

Figures released by the Bank of England have shown that in November, borrowers repaid £376m of unsecured debt and while that was £215m less than the total repaid in October, it’s good to see that people are trying to pay off unsecured debt rather than amass it.

Howard Archer, chief UK and Eurozone economist at IHS Global Insight, says: “The fifth successive net repayment in consumer credit in November is clearly the consequence of many consumers` desire to reduce their debt. It is yet another example of consumers looking to improve their financial situations in the current difficult and worrying economic environment.”

If you have unsecured debt problems, lenders cannot trust you to be able to pay off secured debt. In their eyes they see someone who has taken short-term solutions instead of thinking carefully and saving instead of borrowing. Too much credit card debt, store cards and personal loans points to a borrower who may not be able to deal with a bigger, long-term loan.

Talk to a financial professional about working off your unsecured debt, either through sensible budgeting or through secured debt consolidation to allow you to become a better potential borrower. The person who has worked off debt, budgeted wisely and has listened to sage advice is the person who will be accepted for future secured loans and mortgages.

SOURCE: IHS, BoE, 07/01/10

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Many fresher students have just begun their first year of University and many may already be picking up bad habits when it comes to unsecured borrowing – make sure your children aren’t going down the wrong financial path early on.

The key is to be open with the freshers, talk to them abut the pitfalls they may face with rising debt and do all you can to get them into good spending and saving habits. This is easier said than done, with 19% of students surveyed by Equifax saying they hide the level of their spending and debt from their parents and even their partners.

However, the majority of students who responded to the Equifax survey seem to think they will have limited debts once they graduate. A third expect to have a student loan of less than £5,000 with a further 33% expecting to have a student loan of between £5,000 and £15,000. Of course, not many factor in the spiraling unsecured debts that mount up alongside student debts – debts that may land on your plate if they spiral too far and too quickly.

Neil Munroe, external affairs director for Equifax says: “Our survey of students suggests that many heading back to university this week could find themselves struggling if they don’t keep a keen eye on their finances. Although 77% said they don’t incur bank charges from missed payments and unauthorised overdrafts, 19% only pay the minimum on their credit card each month which could mean they are storing up a mountain of debt that will take a long time to pay off when they graduate.

“Those only paying the minimum each month will see interest mounting, pushing them further into debt. We urge students to manage their finances from the first week of term to ensure they minimise the risk of falling into serious debt.”

So the key is to start hammering home the problems of debt early – nearly 40% of students who responded to the Equifax survey haven’t reviewed their spending since the recession and, worryingly, 30% don’t know how much they spend on credit cards and their current account until their statement comes in each month.

Munroe says: “Understandably, 35% are worried about repaying their debts while studying, while 42% are worried about paying debts off after they have graduated. Indeed, more than a third plan to move back with their parents to help them manage their finances at the end of their course.

“Students should aim to start their time at university debt-free for the best chance of graduating in a strong financial position. There’s clearly a lot of financial pressure and the recession just adds to those worries. However, with a bit of planning and careful management, students can stay in control of their finances.”

SOURCE: Equifax, 05/10/09

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Consumers are spending £3.6 billion on unsecured credit card cheques to pay their way through the as the industry rakes in more than £571m in interest and charges.

New figures from USwitch.com found that over 423,000 cash strapped consumers are using credit cheques to put cash into their bank account in an attempt to get by during tough times – a third of those are using them to consolidate debt.

The website has calculated that the average handling fee of one of these cheques is 2.5%, which equates to £28.49 on the average cheque for £1,141 – over 12 months interest and charges total £178.56 for every cheque used.

It says in total, 280 million credit card cheques have been issued in the last year alone, 97% of which have been unsolicited – almost 2.5 million people receive them from hopeful credit card companies once a month.

Louise Bond, personal finance manager at USwitch.com, says: “It is both alarming and concerning that so many consumers believe these cheques are ‘friendly freebies’.

“There are huge fees and interest rates associated with using them, which consumers need to be more aware of – particularly if they are using them to pay household bills or consolidate any debts. One of the biggest concerns however is that year on year the number of unsolicited cheques being sent out has stayed consistent, 13.7 million have been issued in the last year to people who did not ask for them.

“These quick fix solutions could turn into serious financial hangovers as they are one of the most expensive ways for people to get their hands on cash.”

To keep up with the latest news and comments on current financial affairs please visit the Secured Loan Blog.