Finance Article

Curbs on the sale of payment protection insurance proposed by the Competition Commission could result in more expensive loans, lenders have warned.

The policies cover debt repayments if a borrower cannot work because of accident, sickness or unemployment, but they have been widely mis-sold. To prevent the worst abuses, the Commission wants lenders to be prevented from contacting a customer about the insurance within 14 days of a credit agreement being signed. It also wants single-premium policies outlawed, and advertising made clearer.

Lenders gave warning that the proposed crackdown would force them to push up rates on loans because they would no longer be able to subsidise deals with profits
earned from the insurance.

Payment protection is one of the last big moneyspinners for banks such as Lloyds TSB, Barclays and HBOS, and is worth an estimated £3.5 billion. A huge slice of the profit is expected to be lost if the proposals are approved.

Stephen Sklaroff, director-general of the Finance and Leasing Association, which represents lenders that sell the insurance, said: “Significantly fewer policies will be sold. That will inevitably have an effect on loan rates, possibly pushing up rates by several percentage points.”

That could force loan repayments to rise by more than £100 a year. A borrower seeking a £10,000 personal loan over five years, for example, can lock into a rate of 7.8 per cent with yourpersonalloan.co.uk, paying £200.54 a month. If rates were to jump two percentage points, to 9.8 per cent, repayments would rise to £209.46 a month – an extra £107.04 a year, or £535.20 over the five-year term.

The Competition Commission has been investigating payment protection insurance for nearly two years and estimates that 14 million consumers have been overcharged by £1.4 billion. A spokesman said: “Rates could go up as there is an element of cross-subsidy on personal loans, but that can’t justify us not dealing with the clear problems that we have found.”

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or to fulfill their expensive desires. Such expenditure can lead to economic problems in future. Although, people know all about this, still they cannot help themselves. These expensive desires of human beings cannot be considered as a foolish act. People earn money for their living and on long desired materials. Keeping these problems a person can face mind, various wealth management companies have grown up.

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Many people are caught into a bad debt situation by borrowing money from one source to pay the minimum payments on other items. Or, they put their living expenses into credit cards, and use their income to pay the minimum payments for these credit cards. When these spending habits cycle month by month, something will usually happen at some point that causes the plan of robbing Peter to pay Paul to crash down. So, what you should do if you can’t pay your bills?

When you find it is getting harder to pay your bills each month, don’t let the situation becomes worse, the earlier you try to resolve the financial problem, the easier it gets resolved. Below are a few immediate actions that you should put in place in order to recover your financial situation:

1. Stop spending with credit cards

In fact, credit cards should only be used for convenient purpose, when you have no problem in paying your bills. If you have problem in making monthly bill payments, the first thing you should do is to stop using credit cards. It might be hard to get rid of credit card usage since you have been enjoying the convenient of cashless purchases, but you have to do it while you sort through the mess.

2. Know where your money should be spent

Most people trapped into debt mainly due to uncontrolled spending. Therefore, you should know where your money goes so that you can make sure it goes into the right places. List down all bills that you need to pay each month including the debt you owe, every utility bill, etc. Then, look for things that are optional, which can be cut or reduced, for example cable subscription, electricity usage for air condition, etc.

3. Assess whether your earnings are enough to cover all bills

After cutting and eliminating optional expenses, calculate whether your earnings are enough to pay for bills that are necessities. If you find that your earnings are less than the amount of bills needs to be paid, then you are creating debt, which may burden you one day when you have difficulties to pay the minimum payments.

4. Get help if necessary

If you know you can’t afford to pay our bills, actions need to be taken in order avoid it from going worse. You may need to contact your lenders to negotiate for a finance reconstruction for credit card payments and/or refinance your home to reduce the monthly payment. If you have no confident to handle your debt problem, then finding helps from credit counseling agency might be a good option. The counseling sessions offered by credit counseling service help you to understand your options to handle your financial problem. It is important to understand the available options for debt relief so that you can choose the best option that fits your financial situation.

Summary

You may get into a debt problem if you find you can’t afford to pay your bills and you let the problem as is it. On the other hand, if you do all the above steps to recover your financial situation, then your financial will back to order fairly quickly.