Help My Debt

Older people often find it more difficult to obtain loan approval than their younger peers. 

The justification given by banks and lending agencies stems from concern over whether older applicants will live long enough to pay back the loans offered. 

An independent review of the Banking Code conducted by banking consultant and former Bank of England executive Mike Young recommends that banks take pains to avoid such discrimination. 

Meanwhile, a representative of the British Banking Association gave the opinion that the Code should not be altered on this matter – factors, such as age, that contribute to a proper assessment of loan viability should not be dismissed out of hand, nor should they become obstacles to good lending policies. 

Mike Young’s report, which was received last month to mixed reactions, recommended greater clarity on loans and savings accounts and a more responsible attitude towards consumers who represent a credit risk to banks. 

The report was criticized by consumer groups for not being tough enough on issues such as bank charges. 

The right of lending institutions to practice age discrimination has been upheld, the BBC reports.

Interest rates, which have been on the rise since August 2006, are expected to be cut today by the Bank of England following the monthly meeting of the Monetary Policy Committee (MPC).  Analysts predict the cost of borrowing will drop from 5.75% to 5.5%. 

Global Insight’s Howard Archer has commented that this month’s rate decision is “one of the tightest calls ever”. 

One of the primary factors behind a likely cut, according to experts, is that the rate at which banks lend to one another has recently shown significant growth.  This has led to a sharp economic downturn and a repeat of the summer’s credit crunch. 

Reuters reports that the decision rests on a “knife edge” as the MPC is forced to balance conflicting economic pressures.

The British Bankers’ Association (BBA) has agreed on a new set of industry standards for people applying for Individual Voluntary Arrangements (IVAs) to help control their debt.  Banks and providers have worked out agreements that standardise advertising, advice, information and documentation relating to IVAs.

The standards, due to be implemented by Feb 2008, are intended to make the IVA application process more “streamlined”, the BBA says. 

BBA Chief Executive Angela Knight explained that the new standards would help to reassure people in debt that they are making the right choices for their financial futures. 

“People need to know that when an IVA is proposed, it is the most appropriate solution,” she said. 

During the second quarter of 2007, 26,956 people were declared insolvent in England and Wales.

The Citizens Advice bureau is advising people to plan ahead for holiday shopping in order to minimise higher than usual expected debt due to high interest rates, slow wage growth and rising prices.   

Last year, the most common Citizens Advice enquiries were about arrears on loans and hire purchase, catalogue and mail order debts, credit card debts and overdrafts.

As director of policy at Citizens Advice, Teresa Perchard appreciates the growing debt problem better than most.

“It is very easy to get carried away at Christmas and spend on the spur of the moment, especially if people leave it until the last minute. But every year, we see a huge increase in debt problems immediately afterwards.

“With a little forward planning, Christmas panic buying can be avoided. We hope that these top tips will help people take control of their money as Christmas approaches so they do not start the new year with a debt hangover.” 

Citizens Advice, in conjunction with Barclaycard, has released a set of tips reminding people to be smart with their money this festive season: 

Plan early for Christmas

Be realistic and budget. Work out how much you can spend on each person – and stick to it. 

Do not forget everyday bills

Remember rent, mortgage, utility bills, food bills, council tax and other existing debts must still be paid. The consequences of missing these bills can be severe. 

Do not bank on an overdraft

Do not run up an overdraft without talking to your bank first. Unauthorised overdrafts are an expensive way of borrowing. 

Avoid shop credit offers

Avoid extended credit agreements, such as ‘buy now, pay 2009′ unless they really do work out cheaper. Aim to pay outright for goods by cash, cheque, or debit card. 

Read the small print of any credit offer to make sure monthly installments are within your budget before you sign. 

“Interest-free credit can seem attractive, but if you don’t pay on time, or miss a payment, you might have to pay a lot more,” Citizens Advice warns.

Shop around

Price comparison websites make it easier than ever to find the best prices for goods. With shops expected to slash prices this Christmas, shopping around could really cut costs. 

Consider extended warranties

The cost of a repair could be less than the cost of the warranty. Don’t forget you have the right to reject goods that are faulty. 

With a little forward planning, the new year won’t seem so daunting.