So if, like many people, you find searching for a loan daunting, confusing and time consuming, you may have wondered about the growing number of loan broking services offering to do all this for you. And because it’s what we do, we thought it would be a nice idea to help uncover the facts about loan broking.

What are Loan Brokers?

Basically, loan brokers are a type of middle-man for matching people with lenders. By giving them your details, a loan broker will find you a lender who is most likely to lend to you. You can then apply for your loan.

Yet the industry itself suffers from an image problem. Mention bad credit loans, and you instantly think of a murky world of subprime lenders, loan sharks,  and interest rates of 3000 per cent. Many loan brokers claims are attractive; no fees, guaranteed finance within seconds, and instant credit for anyone who applies.

But online forums include complaints from people who claim they’ve been ripped off or scammed, or want their money back, and warnings about loan brokers who are not providing a proper service are regularly publicised.

So is there any truth in the claims about loan brokers? Do they offer a good service, or are they simply exploiting people?

The personal loans industry is worth billions, so it’s easy to see how  brokers could take advantage of people who need credit. But is this fair? The flip side is that some people argue they have received a good service, and that loan brokers have provided them with real help in solving their borrowing problems. So what is the truth?

Most borrowers would agree that having someone take the leg work out of applying for a loan is a good thing, especially for someone with poor credit. Using a loan broker can be a quick and simple way to finding finance that you will be accepted for. Yet there are also some companies out there who are ripping people off.

So to spot the companies who are only interested in getting their hands on your money and not helping you, it’s important to distinguish between the unscrupulous brokers who often claim to be able to deliver £10,000 to your door within hours, and the legitimate companies who provide a good service.

The majority of complaints surrounding loan brokers, are when customers are supposedly ‘guaranteed’ a loan, and then asked for immediate payment of a fee, to ‘release’ a loan, which doesn’t actually exist.

As a general rule of thumb, a broker can never guarantee a loan for an upfront fee. Actually being accepted for a loan will always be down to the lender. The broker’s job is to find you a lender who is most likely to lend to you, and therefore they simply can’t make these kind of promises. If they guarantee a loan in exchange for an upfront fee, then you may not get the service you are expecting.

So to be on the safe side, you should always ask the following questions:

Are they ‘guaranteeing’ you a loan?

Is the fee refundable if they do not find you a loan or you choose not to accept it?

Will there be any other fees added?

Is the loan dependent on paying for lots of insurance policies?

Are you able to easily cancel your application?

Finally, always check all information you have provided is correct, and truthful to get the best out of a broker. For example, you must make always sure your broker is aware of any other loan providers you have applied to, so that they don’t refer you to someone you have already tried.

As with any type of business, there will always be companies who don’t offer a good service. But by remaining vigilant, and taking care to avoid the pitfalls described in this article, a good loan broker is able to save you time, and money if you need a loan.

Hmm.  Well, admittedly, reading about personal finance isn’t exactly as fun as wondering why Colleen Rooney is still holding hands with Wayne, but understanding finance is key to getting on top of it.  New research from uSwitch.com, shows that almost 71 per cent of us, say that a lack of basic personal financial understanding is to blame for debt.

So with the level of personal debt in the UK now exceeding £1.5 trillion,[1] understanding not only how credit works, but how much it costs, is the first step to sensible borrowing.

I need to borrow money. But what is APR?

In very simple terms, when you borrow money – you have to pay for the privilege! You can tell how much you will be paying for taking out a loan or  credit card, by looking at the Annual Percentage Rate (APR).

So the annual percentage rate is how much you will pay for your loan every year.

Supposing you borrow 2,000 at an APR rate of 10% over 36 months, it will cost you 323.24 in total.  As you continue to pay every month, you pay more and more of the original amount down, so every time the debt gets lower, the 10% will also be less.

(A very easy to use calculator to work out the real cost of your borrowing can be found here.

http://www.moneymadeclear.org.uk/tools/loan_calculator.html

It’s important to remember though, that when you are considering a loan, the advertised APR is only a guide – what you actually pay can be very different, and  it may not include additional charges you may incur such as early repayment charges for loans and late payment charges for cards.

Why is it all so confusing?

Apart from the horrible maths involved in working out APR, loan and credit card providers can confound their customers with complicated rules about the rates.

Credit cards, for example, have what’s known as Multiple APR’s. This means that they charge different interest rates for purchases, cash advance, balances transfers and other types of transaction.

Card issuers may also give you tiered APRS so that, for example the first £400 of your balance may have one rate, and the next £400 have another rate.

And while some cards offer a 0% introductory APR rate, you still need to check what the APR goes up to after that time.

Loan providers too, might offer you a variable APR. This means the rate may go up or down. So always check if your loan has a non-variable APR to make sure that your payments will remain the same

You also need to check which fees are included in the APR, such as admin fees, or introduction fees. This could cover charges for optional payment protection insurance, default charges (for missing a payment or being late or going over your credit limit), and certain other charges such as balance transfer fees.

Choosing a loan…

To make a good decision, you need a true comparison by focusing on the amount you repay by checking the APR, and how long you are paying it for. Normally, the shorter the loan, the more you will end up paying, (eg, payday loans) so if you can’t afford high monthly repayments, aim to spread your loan over a longer period of time. However, bear in mind this will cost you more in interest payments in the long run.

[1] www.walletpop. 30^th September 2010

A new report from research company YouGov, has revealed that a most of us waste an amazing amount of money each day – to the tune of billions of pounds.

According to the survey, we are double tipping in restaurants, throwing away money off vouchers, and accepting hefty credit charges.

The survey showed that:

· Almost 1 in 3 (29%) tip in restaurants even when the food or service is poor
· 78% have thrown away or failed to use money off vouchers
· 67% of women have bought clothes or shoes and never worn them
· 40% haven’t bothered to take faulty goods back
· 1 in 10 (10%) say they would never negotiate over price
· Only around one third of consumers are comparing bank (31%) and credit card (35%) interest rates before purchasing.

(Source: www.journalism.co.uk press releases) 8^th October 2010.

So to stop making these common mistakes, here’s a guide to how.

Tipping

There is no legal requirement to tip, but restaurants often include a ‘suggested gratuity’ at the bottom of the bill, which is a request for a tip. But if service is already included, and you don’t notice this on the bill, then leaving a tip means you are effectively paying a tip twice.

If you have experienced truly terrible service, (ie, the waiter spilt soup in your lap and didn’t even apologise) then you shouldn’t be embarrassed to leave no tip at all. New rules over tipping and salaries in restaurants mean that staff must receive the minimum wage, so any tips are to top up their wages.

Vouchers

Yes – snipping vouchers out of magazines might be something your mum does, but it really can save money. Sign up for loyalty cards to get money off vouchers sent to you, and use voucher sites to get money saving codes and deals for use in hundreds of places.

Sales Shopping

The survey shows that woman make their biggest mistakes in the sales. 60% of women have bought clothes that they thought were a bargain – and then never worn. When you shop in the sales, always ask yourself – would I buy this if it wasn’t on sale? Quite often, the answer is no!

Faulty Goods

The law says that anything you buy must be ‘fit for purpose’ and of ‘satisfactory quality.’[1] If not, then you can take it back. Always keep your receipts.

Haggling

Interestingly, the survey revealed that 94% of people in the South East, South West and Wales said they would try to negotiate over price, as opposed to 86% in The North East and East Midlands.

The most haggling appeared to be on driving down the cost of a car, with 55% saying they had done, or would be willing to try it.

But haggling can be tried anywhere, from department stores to mobile phone dealers. Always ask for more off than you want, to allow them to beat you down. For example, if you want 10% off, ask for 20%. The trick is to be confident, and prepared to walk away!

For more haggling tips, click here.

Shopping around for best Interest Rates

Always do your research to get the best deals on borrowing. If you have a good credit rating, then you should have more options to find a loan with a good APR.  If your credit rating is not so good, then you’re more limited, but using a good loan broker can help you with your search, by finding the best deals for your financial situation.

[1] http://www.which.co.uk/consumer-rights/making-a-complaint/how-to-complain-to-companies/consumer-law-a-summary/

If high house prices have made even buying a small shed in Scotland beyond your reach, then you have probably resigned yourself to renting. Living with magnolia walls and your landlords choice of curtains has its downsides, but at least it’s a roof.

However, new research from the Association of Residential Lettings Agents, shows that for most people finding a place to rent (especially in London) is getting harder and harder. Competition for rental properties is now so stiff, that demand is outstripping supply. (http://www.bbc.co.uk/news/business)

And because there are so few properties, prices are heading ever upwards. According to figures from findaproperty, the average asking price for rent in the capital at the end of the second quarter of 2010 stood at £1,729 per month. That represents a 6.4 per cent increase compared to a year ago. (Source: www.docklands24.co.uk)

So how to get ahead in the rental market?

Firstly, you need to move fast. In some cases, property is going within 30 minutes of being put on the agents list. Although it’s never wise to rush an important decision like renting, if you dither, you could lose the place.

Put your best foot forward. Make sure the agents or landlord know that you’re in a secure financial position. That way, they’re more likely to pick you. If you have poor credit, do what you can to improve it before deciding to move. Landlords don’t like to think their rent is not going to be paid on time!

If your  job is insecure – think twice about moving, or check your contract for a ‘break clause.’ If you have a fixed term contract, this will allow you to give two months notice to move out should you be struggling with the rent.

Make sure you’re using a proper estate or lettings agent. There are many unscrupulous lettings agents out there. Make very sure of the fees before you sign anything, and check that they are registered with an approved tenancy deposit scheme. By law, agents and/or landlords collecting deposits from tenants must be registered, to safeguard the return of your deposit when you move out.

Check that the agent is registered with either the Association of Rental Lettings Agents, or the National Association of Estate Agents. You can check here:

http://www.naea.co.uk/

http://www.arla.co.uk/

Finally, if you find yourself struggling with the rent – always inform your landlord or agent. They will be a lot more sympathetic if you explain your situation. You may even be able to claim Housing Benefit if you find yourself out of work. Bear in mind however, that you will only be able to do this if your landlord is not restricted by their mortgage company.

The new charges mean that BT have raised the cost of call connection by 10 per cent, daytime call costs by eight per cent and standard line rental by four per cent. (Source: News of the World. 25th September 2010)

Talk Talk customers are also seeing an increase in price from 5.8p to 6.4p a minute for daytime calls, with line rental charges to rise by 55p to £12.04 a month, and call set-up fees up 1p to 10.9p. (Source: The Guardian. 25^th September, 2010)

So what can you do to cut the costs?

Apart from using two old baked bean cans and a piece of string, the obvious answer is to switch to a cheaper provider. However, if you don’t want to do this, you can change your BT package. They are offering a 12-month Line Rental Saver deal costing £113.88 for the year , which works out at £9.49 a month – and includes free weekend calls. However, the downside is that you will need to pay for the whole year in advance in full by 29 October. See www.bt.com for more details.

If you do want to switch, but are tied in to a contract, don’t worry. New Ofcom guidelines about to come into effect say that you can escape your contract by paying just £2 – £4 per unused month rather than the full line rental. You just need to check that this will actually save you money by getting your pencil and paper out and doing a few boring calculations comparing costs. Or try the homephone calculator.

For more info about the new OFCOM regulations click here.

Best Deal

Primus are offering Line rental plus weekend calls for £8.25/month.

For £99, paid up-front for a year, The Primus Saver Plus promo works out at £8.25 per month, and includes weekend calls to landlines. (www.primussaver.co.uk/saver-plus.aspx) Alternatively, pay £8.99 monthly and get evening calls too (see www.primussaver.co.uk).

(Source: News of the World. 25^th September 2010)

Try Uswitch, to calculate the best deal for your phone useage.

http://www.uswitch.com/home-phone/

Use prefix codes

A little known but clever trick which can cut the costs of your calls by half, is to use a phone firm which reroutes your calls by asking you to enter a number before you dial. This works on all BT and Primus lines. All you do, is sign up for a provider such as http://www.18185.co.uk/index2.php who charge just 5p per call, no matter how long you talk for. Amazing!

Other prefix call providers include http://www.superline.co.uk/ or http://www.firstnumber.co.uk/.

Peak Times – Save the Chat

Don’t forget – most phone companies have now also changed their peak rate (most expensive time to call) from 6am to 6pm, to 7am to 7pm. So if you save your calls until after then, you’ll be saving money too.

More than 100 MP’s have voted in an early-day motion, for a cap on the exorbitant cost of credit charged by firms offering quick and easy cash to people on low incomes.

Campaign group, End Legal Loan Sharking, describes the interest rates charged by loan sharks as a ‘national scandal’ and are calling for the government to step in and restrict the rates charged.[1]

Doorstep lending and loan shark rates sometimes top 3,000%, meaning that borrowers can be paying £30 interest on every £100 borrowed. Yet the Office of Fair Trading recently ruled that these kind of rates were acceptable – arguing that they worked ‘reasonably well.’[2]

The increase in the amount of people having to apply for these types of loans, however, has led to concerns about the exploitation of vulnerable customers being raised once more.

Marie Burton, of Consumer Focus, is quoted in the Daily Mirror, as warning that such high rates are leaving consumers who defer payments or take out repeat loans, as being caught in a ‘debt-trap’. [3]

The group says the number of workers using payday loans has risen 400% to 1.2 million since the start of the recession, leaving these borrowers owing £1.2billion to high-rate lenders.

The motion is also calling on the Government to provide alternative affordable sources of credit through the post office network, credit unions, and mutual societies. Meanwhile, the recent introduction of My Home Finance, a new Government lending scheme for those on low incomes, has been welcomed.

[1]http://www.mirror.co.uk/news/top-stories/2010/09/08/wage-war-on-loan-sharks-115875-22545403/

[2] http://www.guardian.co.uk/money/2010/jun/15/doorstep-lenders-interest-rate-cap

[3] http://www.mirror.co.uk/news/top-stories/2010/09/08/wage-war-on-loan-sharks-115875-22545403/

Banks and building societies, however, now have to follow strict bank account switching guidelines. Basically, they have to pass on every detail about your account to your new bank within three days. This includes direct debit and standing order information. So switching doesn’t have to be difficult – and you could save (or even earn) money by doing so. Some banks will give you up to £100 for moving over to them.

To choose a new account, you must, as always, compare what benefits there are to you. You can use a comparison tool such as this one at moneysupermarket to help you decide. Bear in mind though, that opening a new account will also depend on your credit score, and some accounts now need you to pay a minimum amount in every month.

Once you have decided on a new account, there are a few things you need to know to make the move as smoothly as possible.

Opening a new account:

To open a new account, you will need a passport or driving licence, and a proof of address, such as a utility bill. Once the bank has approved you, they have ten days to open your account. Your old bank has three days to transfer all your direct debit and standing order information to the new bank.

Keep the old account open until the new one is running well – otherwise, if a direct debit payment or standing order has been missed, your credit record could be damaged.

What your new bank has to do:

Your new bank will provide you with a copy of all the information they have received from the old bank about direct debits etc.

Contact all the direct debit companies, asking them to change their records.

Ask your old bank to cancel all the old payments you have with them.

Set up standing orders on your new account

What you have to do:

Tell your employer or pension provider (or anyone who pays you money) of your new bank details

Return all your old cheque books and cards to the old bank, or confirm you have destroyed them.

Tell your old bank when you would like to transfer any funds you have in their account to the new one.

If you’re still not sure, it’s worth knowing that 70% per cent of people say they didn’t experience any problems during the process. (Source: The Independent , 12^th June 2010) Just take time to find the right account, and you could find an account that’s easier on your pocket. And apologies if you still have a mullet…they say everything comes round again. It could be soon.

If you have poor credit or a low income, then accessing credit can be hard. But the government are stepping in with a new initiative designed to help.

Ian Duncan Smith, the Work and Pensions secretary, is launching a new loan scheme especially for people who are not able to borrow from the banks, because of having a low income or a poor credit rating.

The scheme, called ‘My Home Finance’, is being run by the Royal Bank of Scotland, The National Housing Federation, and the Wates Foundation. The aim is to provide loans at an APR rate of 29.9%, as a ‘fair price alternative’ to  doorstep lenders and loan sharks, who have been accused of exploiting those on low incomes with massive interest rates of (in some cases) up to 3000%.

Currently, some 2.5 million people borrow from doorstep lenders,[1] but My Home Finance, can offer loans for around £500 for a year, after applying through a face-to-face interview.

The scheme will start by the end of October, with ten branches opening across the West Midlands, where there is the largest number of people in the UK suffering from unemployment and low wages. If a success, the scheme will be available to anyone on a low income across the UK, from April.

MHF chief executive David Orr has said: “This ambitious not-for-profit sustainable scheme shows the determination of the housing association sector, the Government and RBS, to help financially excluded consumers join the financial mainstream by saving and borrowing in a fair and responsible manner.” [2]

The scheme is not without its critics though. A rate of 29.9% is about the same as a bad credit credit card interest rate, which if paid off at the end of the month, would not cost anything at all. And Malcolm Hurlston, chairman of the debt advisory charity Consumer Credit Counselling Service, is quoted in The Guardian as saying that although he is welcoming of the launch of My Home Service, that the limited number of loans available would mean that it could not replace doorstep lenders and payday loans. [3]

Whether the scheme is a success or not, is hard to say at this stage. But access to loans at a more affordable rate is certain to be welcomed by a great many people currently finding it so difficult to borrow.

[2] http://www.yorkshireeveningpost.co.uk/news/My-Home-Finance-Lender-offers.6545566.jp

[3] http://www.guardian.co.uk/money/2010/sep/23/my-home-finance-government-loan-scheme

So how we view risk is generally completely irrational –  and made a lot worse by films like Jaws and Airport. (There has yet to be a disaster film about anyone choking on a peanut), and anytime there is a real disaster, we tend to overreact.

The banks however, have gone into disaster movie overdrive.  Years of taking risks have caused one of the biggest financial crashes in history, and so the banks have decided they don’t like risky business anymore, putting the brakes on lending to all but the most watertight customers. But, (and this is an even bigger but), even when they do lend, their rates are rising.

The Bank of England have just released their quarterly report (20^th September 2010) highlighting the fact that unsecured loans are costing far more than before the credit crunch. Banks are not passing on the low base rate of 0.5 %, and instead, are profiting by charging 38 times more. (Source: The Guardian Online, Business, Sep 20th 2010)

In other words, the banks are boosting their profits by hiking up interest charges across all forms of lending, from around 8.5 % to around 11%, on everything from overdrafts to credit cards.

The reason for this is thought to be due to the banks covering themselves against any further bad debts, and building their capital, leading to bad news for anyone hoping to borrow.

The government say they are aware of the problem, and Business Secretary Vince Cable has fiercely criticised the banks for not lending, particularly to business. Yet the banks argue that there is a lack of demand for customers.

The figures however, suggest otherwise.  The amount of applications for payday loans has quadrupled since 2009 to 2010, and demand for all forms of credit is greater than ever. Just as importantly, customers need loans at rates they can afford. £183million is paid in personal interest on debts in the UK on a daily basis.[4]

However, any hope of things improving  still seems a long way off: experts are predicting that prices could rise further, as more customers default on their debts due to unemployment and spending cuts.  (Source: Finance Markets, 20th Sep 2010)

If this was a real disaster movie, someone would save the day. Probably George Clooney. But it doesn’t look as if anyone is coming to the rescue yet…so until then, we’ll all just have to stay in, and  watch DVD’s. Erm, The Perfect Storm anyone?

(If you like maths and are feeling a bit geeky – you can read the Bank of England’s Quarterly Report here.)

[1] http://www.planecrashinfo.com/cause.htm)

[2] http://diver.net/bbs/posts001/55446.shtml

[3] http://quazen.com/games/gambling/intriguing-death-odds/

[4] http://www.creditaction.org.uk/debt-statistics.html

Almost immediately after the tax mistake hit the headlines, the scammers got to work by sending out thousands of emails to try and swizz people out of their money, under the pretence of being from the HMRC.

Using the HMRC logo, the email claims to help you apply for your tax rebate, by containing a link asking for bank details. The scammers are then able to access your bank account.

The HMRC website gives the following advice: ‘HM Revenue & Customs (HMRC) would not inform customers of a tax rebate via email, or invite them to complete an online form to receive a rebate of tax. Do not visit the website contained within the email or disclose any personal or payment information.’

However, there are also independent warnings from financial experts,  that scammers may even attempt to con people with letters, so always check with the HMRC that the address you’re replying to is the real one.

To contact HMRC, click here.