The increase in the cost of food, petrol and fuel is causing individuals and families to adopt even more financial belt tightening measures. As a result there has been a fall in the amount that is being borrowed in the form of unsecured loans and credit.

The British Bankers Association has revealed that UK consumers only borrowed a total of £0.3 billion in June ,which compares with the £0.4 billion that was spent in May.

Personal borrowing in the form of credit cards and loans shows no sign of increasing in the near future and households are facing serious difficulties if they fail to regulate their daily expenditure. Unfortunately, the credit crunch is altering the financial behaviour of a significant number of households.

A representative of the British Bankers Association stated that people are currently attempting to trim their debts and increase their savings. However, the current economic situation is hampering their best efforts.

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The UK is now considered to be Western Europe’s capital in terms of personal debt accumulation. Figures show that ,last year, the average person in Britain was over £3,000 in debt in comparison to the Western European average of £1,560. Unfortunately, Britain now accounts for around 30% of all personal debt in Europe’s western countries. This is more unhappy news for the UK as it struggles under the weight of the current credit crisis and tumbles towards recession.

Britain registered an unsecured debt total of £1.35 billion in 2007 which represented a 10% increase on figures for the previous year.

Industry insiders predict that the UK’s personal debt situation will worsen as the economic downturn continues. As more and more individuals and families begin to feel considerable financial pressure from the increasing cost of everyday living, there appears to be little alternative to borrowing more money from lenders. It has been estimated that for every five minutes the UK’s personal debt total rises by over £1 million

Those who are attempting to break the personal debt cycle are advised to implement financial controls on their spending habits and curb unnecessary expenditure. It is always worth remembering that there are a number of specialist agencies that will provide advice on how to handle debt.

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The Association of Investment Companies ( AIC ) has reported that students are leaving university with an average loan debt of around £13,000. The situation is expected to deteriorate with the AIC predicting that ,next year, extra top-fees will see graduates leave university with a £20,000 deficit.

The AIC also stated that over 50% of students have to rely on loans to ensure thatthey complete their studies. Over 10% suggested that they have no other option than to take on part-time work in order to ensure that they received a steady source of income and avoid further debt.

The credit crunch is hitting the British way of life and an increasing number of parents are finding that they are unable to cope with the financial demands of university fees. It is recommended that parents take the time to plan for the financial expenditure that is associated with student life.

There are no signs that there will be a reduction in the cost of university education despite the current effects of the economic downturn on every day living costs.

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A Bank of England ( BOE ) report has revealed that the UK’s levels of overdrafts and personal debts have risen from around £161 billion to £177 billion over the last 12 months. The increase has been attributed to the current global credit crisis which has meant that individuals are struggling to meet the cost of living. BOE figures have also shown that current account overdraft rates had risen from 17.4% to 17.9% during the month of June.

It was also found that lenders are restricting the amount of personal loans that are being issued which is adding to the financial pressures that are currently bearing down on individuals and households. Many people are also having to turn to debt agencies for assistance as they find that they are unable to cope.

Additional research by the Office of the National Statistics has uncovered the fact that over 60% of consumers have no idea of what fees they are paying for their overdrafts.

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Barclays Bank has announced that it will no longer provide secured loans as a result of what it called slow demand. The bank ,which provides secured loans through its Firstplus business, will cease to issue new loans from 9th August. However, the bank has moved to assure its current customers by stating that their accounts and loan status will remain unaffected by the new changes.

Financial institutions whose main business model is reliant on the provision of secured loans are under pressure from the increasing cost of funds as a direct result of the effects of the global current credit crunch.

A wide range of secured loan providers have already been implementing a series of measures to ensure that their lending criteria is tightened.

A spokesperson for Firstplus stated that the secured loans market did not have the strength or stability to enable the loan provider to further develop its business strategy.

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If you’re seeking to finance home improvements or a newer vehicle the chances are you will have asked the family for any spare cash that they might have lying around. If your family can’t help then the next thing you’ll want to do is check out the latest advertisements for the best loans. You may even wish to apply for a cheap loan that comes with payment protection insurance.

You should be aware that the cheapest loans may not always be as cheap as they first appear. Lenders will be more than happy to offer payment protection insurance as it simply means you’ll be paying them more money. Do not feel pressured into accepting your lender’s insurance policy offer without comparing the prices of similar products. There are a wide range of stand alone payment protection policies that will not be as costly. The Save On Bills comparison service is on hand help to you to find the best loan insurance deals

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The government has unveiled plans to ease the rules around credit unions in order to make it easier for workers who are on low incomes to gain access to loans. The move will allow these organizations to offer financial alternatives to the traditional financial sector firms. It is also hoped that this will combat the rise in door step and pay day loans that usually sees the borrower face exorbitant interest rates. Credit union interest rates are usually set at 1% per month and do not exceed 2% .

Credit union members normally live or work within the same area. The government aims to broaden the appeal of these credit organizations by ensuring that membership is no longer dependant on geographical factors.

The UK currently has over 500 Credit Unions with a combined membership of around 500,000. However there could be a marked increase after the government’s planned rule relaxation.

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With the economy in freefall and the credit crunch continuing to have an effect on family budgets , people are beginning to seek out alternative routes of raising finance. Some people are even committing themselves to loans that have exorbitant interest rates. One of the newest types of loan product is known as a ‘logbook loan’.

Logbook loans are those loans that require people to use their vehicles as security. The firms that deal with this type of loan will normally lend you a percentage of your vehicle’s actual trade cost. The company will ask you to surrender your V5 registration, insurance and MOT documents. You will also be required to enter into an agreement that will give the company ownership of your vehicle if you default on your repayments.

If you do fail to keep to your repayment terms then your vehicle will be repossessed and sold at auction and you will be asked to pay any outstanding monies if the sale does not meet the loan value. You should also be warned that these loans are extremely expensive and APR’s can rise to as much as 430%

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All lenders will charge an interest rate against a secured loan. This interest rate is known as an Annual Percentage Rate ( APR ). So if you are using your property as security for a loan the amount of money you can borrow, the length of time you can borrow it for and the APR depends on your property’s equity status, your credit history , your reason for requesting the loan and your ability to repay the loan ( eg are you employed, self-employed or unemployed ). Depending on your personal circumstances you may find that you can borrow as much as 125% of your property’s value. The APR’s that lenders usually advertise should only be viewed as guidelines. The APR a lender charges will always depend on your personal circumstances.

You will usually find that secured loans are more accessible than personal loans. A lender prefers to issue this type of loan because your property will protect them against any circumstance where you are unable to keep up with repayments.

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A secured loan is a loan where the borrower is required to provide a lender with some type of security and this usually takes the form of a property. If you secure a loan against your own property whilst there is still an outstanding mortgage this is referred to as a second charge. However, if you secure a loan against a property where the mortgage has already been cleared ,this is commonly known as a first charge.

The amounts that you can borrow normally range from £3,000 to £50,000. As a condition of receiving a secured loan you will be expected to make monthly repayments over an agreed period of time . This time period can range from three to twenty five years. If you choose to settle your loan earlier than agreed you may find that you will be subject to a financial penalty. You should always check the terms and conditions that are associated with a secured loan prior to making any contractual commitment.

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