The £60 Billion Loan Write-Off
Itís Budget Day on April 22nd and Chancellor Alistair Darlingís date with destiny is expected to include some good news for people with loans.
The bad news is that the people with loans who are going to be celebrating are bankers ñ and the even worse news is that the Chancellor is expected to say up to £60 billion of the cash loaned in bailouts to the banks is going to be written off.
Ordinary borrowers will be amazed to learn that you can write off a loan and not pay it back but then again whatís a spare £60 billion when youíve saved the banks?
Of course taxpayers might argue that if weíve bailed them out then they should take a similarly relaxed attitude to people not being able to pay back their loans.
But of course thatís not how it works and to make it even worse the rates that banks are currently charging for loans can be as high as 21 per cent.
Of course it doesnít have to be that way and MoneyExpert.com can show how to stay ahead in the loans stakes.
Credit crunch guru and Liberal Democrat Shadow Chancellor Vince Cable says it ìbeggars belief” that banks are charging so much for loans.
Researchers say rates on small loans for around £2,000 can be as high as 21 per cent and it is the bailed-out banks such as NatWest and Lloyds TSB who are the big chargers.
Yorkshire Bank charges 20.9 per cent for £2,000 over three years while NatWest asks for 21 per cent and Lloyds TSB for as much 20.9 per cent.
Not all loan firms are as tough ñ Abbey wants 8.9 per cent while Post Office Personal Loans asks for 13.9 per cent and the AA and Halifax 18.9 per cent.
Borrow more ñ itís cheaper
It sounds wrong but the more you borrow the more likely you are to get a better rate for your cash.
And in fact the longer you borrow the money for, the more likely you are to get a lower rate.
If you are borrowing £10,000 over five years and have a good credit record then Alliance & Leicester will charge you 8 per cent while Halifax and Bank of Scotland will both charge 8.1 per cent.
Over the five years you will pay around £2,166 in interest on the cash.
If your credit record is not so good then you might be able to borrow at 10.9 per cent or 12 per cent from Black Horse or Credit Plus and your £10,000 will cost you between £12,864 and £13,346.
If you have a bad credit record ñ say youíve missed a few payments ñ then the rates are going to be higher with Real Personal Finance charging 63.1 per cent. In that case over five years youíll pay £33,078 for the £10,000.
Paying it off
Borrowers generally are weaning themselves off the debt habit ñ in February more than £245 million of debt was repaid.
That is the highest amount of debt repaid in a month on record. In January 2009 we actually took on extra credit to the tune of £165 million.
It makes sense to get on top of your debts and to cut your bills as it saves you money in the long-run and ensures youíre debt-free.
If you are worried about your job in the recession then it makes sense to cut your outgoings and getting rid of debts.
But sensible borrowing can be a good idea as long as you ensure you pay the lowest rate possible and always have a clear idea of how to repay your debts.